A strange contradiction is being seen in the Indian stock market these days. On one hand, the corporate sector is preparing to register strong earnings and profits of 20% to 27% in the second quarter of the financial year 2026-27 i.e. July-September. On the other hand, there is an atmosphere of heavy selling in the stock market. On October 8, Sensex and Nifty closed at their lowest levels in a long time. Due to this, common investors are confused as to why the market is falling despite strong results?
Market experts say that this decline is not happening due to the internal economic situation of the country. This is because of the negative signals coming from all over the world. The stock market is deciding its stance keeping in mind future global threats instead of today's data.
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Where will the shine be seen and where will the pressure be?
Even though there is pressure in the stock market due to the outflow of foreign capital. India's strong domestic market is supporting companies' earnings. Analysts believe that banks and financial institutions will remain the biggest earners in this quarter. The results of big banks are expected to be excellent due to strong demand for loans, reduction in non-performing loans (NPAs) and low credit costs.
Along with this, strength is being seen in automobiles and new age tech platforms. The supply of crude oil has been affected due to the US-Iran war that has been going on for the last 8 months. This has increased the cost for a big oil importing country like India. Big companies will benefit from this but there may be pressure on the margins of oil marketing companies. Demand in the IT sector is likely to remain sluggish.
5 big reasons for market decline
According to the indications received so far, there are 5 big reasons which clearly show why the market is declining. Let us know what?
Even though the financial results of Indian companies are looking good, foreign investors (FPIs) are continuously withdrawing their money from the market and investing it in safe places. Domestic investors and retail SIP purchases are also not able to handle the market in the face of this FPI outflow.
Due to the strengthening of 10-year bond yield and dollar index in America, foreign investors are getting good returns without any risk. Because of this, they are withdrawing money from high valuation markets like India and transferring it to the US debt market.
Due to the cost of crude oil, the costs of companies will increase in the coming quarters. This will reduce their profit margin. India imports 85% of its oil needs. Therefore, expensive oil also increases inflation and current account deficit in the country.
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With the Indian rupee reaching a record low against the dollar, the real returns of foreign investors decline. For example, if a stock has a 15% gain and the rupee depreciates 5%, the real dollar return for a foreign investor drops to just 10%.
The valuation of the Indian market is above average while shares in other markets like China or Korea are getting cheaper. Moreover, analysts fear that if the impact of global recession and expensive oil continues, this strong pace of corporate earnings may slow down in the times to come.