Indian Stock Market Faces Correction: Nifty, Sensex Hit by Inflation & Weak Earnings | November 2024 Update

Highlights

The Indian stock market entered a correction phase in November 2024, with the Nifty and Sensex falling nearly 10% from September peaks.

The Indian stock market, which had been hitting record highs earlier this year, is now facing selling pressure and has entered a correction phase.

After reaching record peaks in September 2024, the Sensex and Nifty 50 have fallen nearly 10%, and the mood on Dalal Street is cautious.

A Tough Week for Indian Markets

In the week ending November 18, 2024, both the Nifty 50 and Sensex saw losses.The Nifty 50 dropped 2.5% to close at 23,532, while the Sensex fell 2.4% to end at 77,580.

This was the sixth loss in seven weeks, signaling a market correction. The Nifty 50 closed below its 200-day moving average for the first time since April 2023, signaling market weakness. Despite a flat opening, major stocks faced selling pressure, pushing the market lower.

Rising inflation, especially in food prices, along with disappointing earnings from several companies, worsened the sentiment.The Q2 earnings season showed weak results in sectors like domestic consumption.

Sectors Perform Differently

Most sectors posted losses, with metals, FMCG, and auto stocks falling the most. The IT sector gained nearly 1%, while midcap and smallcap stocks dropped over 4%. The Nifty Bank index fell nearly 3%, contributing to the overall market decline.

Global and Domestic Factors Affecting the Market

Several factors are contributing to the current market weakness. Domestically, concerns about rising inflation and weak earnings from some sectors are dragging down sentiment. The Indian rupee’s decline against the US dollar is also a worry, as it could increase import costs for businesses.

Globally, rising US bond yields and a strong US dollar have led to capital outflows from emerging markets like India. Geopolitical tensions, especially in the Middle East, are also keeping investors cautious. In the coming weeks, the market will be watching the results of the Assembly elections and any important economic data.

Mixed Earnings Season

The earnings season for Q2 was a mix of good and bad news. While the financial and IT sectors performed well, sectors like domestic consumption and materials faced challenges. Rising costs and weaker demand have hurt companies in these areas.

“Even though the market has been down, we remain cautiously optimistic,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart. “We expect to see some recovery in the second half of FY25, especially with more government spending, a good monsoon, and a potential recovery in rural demand.”

Looking Ahead

As the market faces short-term challenges, some analysts see hope for a recovery in the latter half of FY25.

Investors are looking for signs of improvement, particularly in government spending and rural demand. However, in the near term, the market may continue to consolidate as it responds to both global and domestic factors.