Stock market likely to continue its downtrend till US elections get over

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Subscribe to enjoy similar stories. Equity markets could continue their downtrend, interspersed with a bounce, until after the US presidential elections on 5 November, market experts said.

Benchmark index Nifty50 has lost 6.3% to 24180.8 so far this month, pulled down by record foreign portfolio investor (FPI) selling amid geopolitical concerns, tepid quarterly earnings growth and regulatory strictures taking effect. FPIs have net sold cash shares worth ₹88,826.75 crore in the month through 25 October, based on NSDL and BSE provisional data.

While domestic institutional investors (DIIs) have net invested ₹97,090.83 crore over the same period, the downtrend is likely to continue due to a slew of reasons, although a bounce is possible after four straight weeks of a fall. "A confluence of factors has caused the pullback this month," said Nilesh Shah, MD, Kotak Mahindra AMC.

"Chief among them is the selling intensity of FPIs, which is prompting DII buying at lower levels in cash, collateral in the form of stock margin for derivatives trades being curbed by regulators, margin trading facility (MTF) trades being liquidated as margin calls are being made on price corrections, lofty valuations correcting on earnings disappointment in Q2FY25 and geopolitical factors such as outcome of impending US elections and US bond yields rising despite Fed rate cut probably driven by the burgeoning fiscal deficit," Shah added. A review of 637 companies' Q2FY25 numbers shows a year-on-year decline of 0.6% and a sequential fall of 5.13% in net profit at ₹1.96 trillion.

In the year-ago quarter, net profit had surged 49% y-o-y and 3.9% sequentially to ₹1.97 trillion. Aside from FPIs diverting funds to China from India following rate cuts and