Indian stock markets may stay flat in October amid global pressures

Indian stock markets are expected to stay flat or possibly slip further in October following one of the sharpest monthly sell-offs in recent years.

The benchmark Nifty index slid nearly 6 percent in September and recorded its eighth consecutive weekly decline, marking the longest losing streak in 25 years.

Experts cited global challenges such as rising US yields, a strong dollar, high crude oil prices, and rupee weakness as the main obstacles facing the markets.

While October may see some stability, a full recovery is unlikely in the near term.

Factors like festival demand, government expenditure, and the onset of the earnings season might support large banks, select manufacturers, and companies linked to domestic consumption.

However, foreign institutional investor inflows are expected to remain subdued, with sustained recovery relying more on oil prices and US yields than merely on domestic demand.

In September, the Nifty and Sensex fell sharply as foreign investors sold aggressively, crude prices remained elevated, the rupee weakened, and US bond yields surpassed 5 percent.

During the last week, the Nifty fell for all four trading sessions, ending 3.1 percent lower at 22,422.

Foreign institutional investors net sold shares worth Rs 34,970 crore in the past week and ended their two-month buying streak in September, with year-to-date outflows exceeding Rs 2.5 lakh crore.

domestic liquidity might provide some support, experts warn that a durable market recovery will be difficult if foreign selling continues.

Several analysts anticipate a recovery by December led by large-cap stocks and advise investors to prioritize domestic earnings, reasonable valuations, and companies with strong balance sheets.

They also cautioned that mid- and small-cap stocks may take longer to generate profits.

The second quarter earnings performance will be closely watched, especially top-line growth, profit margins, and management commentary, as weak monsoon conditions in various states could negatively impact investor sentiment.