October Market Declines: India's Indices Face Sharp Losses Amid Global Tensions

In October, India's benchmark indices, Sensex and Nifty, saw the largest declines among major global markets.

This drop was due to significant foreign outflows and increased geopolitical tensions. The Sensex fell by 6.2 percent. The Nifty decreased by 6.6 percent in dollar terms.

These were the steepest losses compared to other key indices.

In the U.S., the Dow Jones slipped by 1.34 percent. The S&P 500 fell by 1 percent. The Nasdaq dropped by 0.5 percent.

In Europe, the UK's FTSE 100 declined by 5.52 percent. France’s CAC 40 dropped by 6.1 percent. Germany’s DAX fell by 3.8 percent.

Asian markets also saw declines in October. Japan's Nikkei fell by 3 percent.

Hong Kong's Hang Seng dropped 4 percent. China's Shanghai Composite decreased by 3.44 percent.

In contrast, Taiwan's TAIEX gained 1.5 percent. South Korea's KOSPI, however, fell by 4.7 percent. The Philippines’ PSEi declined by 3.5 percent. TOPIX lost 4.6 percent, and Indonesia's Jakarta Composite Index slipped by 2.8 percent.

Global markets are affected by rising U.S. bond yields. Despite the Federal Reserve’s 50-basis-point rate cut in September, the U.S. 10-year bond yield rose from 3.6 percent to 4.3 percent, increasing capital costs for foreign investors in emerging markets.

Concerns have emerged about the potential impact of further rate cuts, which were initially expected to total 300 basis points this year, but so far only a single 50-basis-point cut has occurred.

Hopes remain for additional 25-basis-point cuts in November and December.

Indian markets experienced heavy selling from foreign institutional investors (FIIs) in October. The total selling reached over Rs 1 lakh crore. Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, noted that the U.S. presidential election is affecting FPI activity in other markets.

The Q2 results of Indian companies added additional pressure to the markets. As FPIs respond to U.S. developments, their selling is expected to continue. This will impact the outlook for India and other emerging markets.

An Emkay Global report stated that the correction in Indian equities was mainly due to a downgrade in FY2025 earnings per share (EPS) forecasts.

Bloomberg data showed a 13 percent drop in Nifty's EPS estimates for October. Nearly half of the Nifty companies saw EPS cuts of more than 1 percent.

Analysts are questioning the market's direction. They are looking into whether domestic challenges have a greater impact than external factors.

They are considering issues like upcoming state elections and bad weather. They want to know if these factors affect the market more than rising commodity prices.

Domestic buying remains steady. However, foreign selling has increased the downward trend. Urban consumption is weak.

There have only been slight improvements in rural areas. Concerns in the finance sector continue.