Markets gain as FPI selloff eases; Sensex and Nifty close 0.6% higher

Benchmark indices managed to recover from early losses and closed with gains of 0.6% on Monday, driven by a slowdown in selling by foreign portfolio investors (FPIs) and positive performance in cyclical stocks. Investors chose to overlook weak GDP data for the September quarter (Q2FY25).

The Sensex, which initially fell by 494 points or 0.6% in opening trade, rebounded to close at 80,248, marking an increase of 445 points or 0.6%. Similarly, the Nifty 50 index ended the session at 24,276, up 145 points or 0.6%. Gains were widespread, with nearly all sectoral indices finishing in the green.

Last week’s GDP data showed the Indian economy growing at its slowest pace in seven quarters, with a year-on-year (Y-o-Y) increase of 5.4% in the July-September period, down from 6.7% in the previous quarter.

"Despite the slump in Q2 growth rate, the market remained positive as the core sector output for October indicated recovery. Slowing earnings growth has already been factored in, and mid and small-cap stocks are rebounding. However, investors remain slightly cautious ahead of the RBI policy meeting this week, with concerns over a potential GDP forecast cut. Current inflation dynamics are not favorable for a short-term rate cut, and the RBI is expected to adopt a more realistic growth projection for FY25,” said Vinod Nair, Head of Research at Geojit Financial Services.

Even with Monday's gains, the Sensex remains 6.7% below its record high reached on September 27. Meanwhile, the Nifty is still down 7.6%, and the Nifty Midcap 100 and Nifty Smallcap 100 indices are down 6.4% and 4.1% respectively from their record highs.

FPI net sales amounted to Rs 238 crore, while domestic institutions purchased stocks worth Rs 3,589 crore, as per data from stock exchanges.

In other news, the dollar index rose by 0.5% to 106.2 after President-elect Donald Trump warned BRICS nations against creating a new currency as an alternative to the dollar. Despite FPI selling, the rupee hit fresh lows, and oil prices rose amid signs of a slow recovery in the Chinese economy. China's manufacturing activity increased for the second consecutive month in October, reaching the highest level since June. Brent crude prices climbed by 1.2%, trading at $73.12.