Indian stock market remains on consolidation path, DIIs absorb heavy selling

Mumbai(The Uttam Hindu): The week saw Donald Trump returning to power in the US election amid a second consecutive rate cut by Fed this year, as the Indian stock market continued to experience consolidation due to heightened selling pressure from foreign institutional investors (FIIs). 

This broad-based correction is particularly evident in sectors with excessive valuations, according to experts.

However, despite the massive FII selling, the stock market is resilient since the valuations are fair and every selling is being absorbed by domestic institutional investors (DIIs) and individual investors, particularly high-net-worth individuals (HNIs).

DIIs have been a strong buyer absorbing the selling and mitigating the fall. They infused more than Rs 1 lakh crore in Indian equities in October, keeping the stock market healthy compared to its global peers.

On the other hand, the recent rebound in India's domestic manufacturing activity is a positive sign.

“This year, government spending is expected to be back ended due to general elections this year, so there is a leading expectation of improved corporate earnings in H2 FY25,” said market watchers.

The festive season in Q3 is likely to revive consumption, which should support market sentiment and will aid find a floor in the near future.

On the global front, the return of Trump has reduced political uncertainty, providing relief to global markets. The Fed's 25 bps interest rate cut also offers some support.

After the massive FII selling of Rs 113,858 crore in October, FIIs have so far sold equity for Rs 19,849 crore in the cash market this month.

Experts said that the FII selling trend is likely to continue in the near-term till data indicate the possibility of a trend reversal.

On Friday, the Indian stock market closed flat. Sensex slipped 55.47 points, or 0.07 per cent, to 79,486.32. Nifty fell 51.15 points, or 0.21 per cent, to 24,148.20.

According to Deepak Jasani, Head of Retail Research at HDFC Securities, Nifty extended losses to a second session after a range bound zigzag move.

“The short-term trend of Nifty continues to be choppy, and this consolidation is likely to continue in the near term with a weak bias. The next lower supports to be watched around 23,800 levels. Immediate resistance is placed at 24,537 levels,” he mentioned.