Short covering and no major aggravation in the West Asia geopolitical issue made Indian equities heave a sigh of relief on Wednesday, making the market inch higher for the third straight session. However, some experts believe that it is still too early to say if the market has bottomed out, given the uncertainty on when the war will come to an end.
On Wednesday, investors’ wealth rose by ₹5.70 lakh crore, as per data on the BSE. The Nifty 50 ended 0.8% or 196.65 points higher at 23777.80 points and the BSE Sensex closed at 76704.13 points, up 0.8% or 633.29 points. The day’s gains were led by shares of information technology, realty, and auto companies as well as the mid-cap and small-cap pack.
Both benchmark indices gained almost 3% each in three sessions, almost recovering from the war-led fall. They are also around 10% down from their record highs. A few anticipate the market to fall 5% more in case of a prolonged war and if the Brent crude oil prices remain above the $100-per-barrel mark for longer, they said.
Valuation Concerns
In the last two years, valuation of the 50-stock index has eased from its peak, though it is still a “little pricey” among Asian peers, market experts said. There are concerns about potential downward revisions to FY26 as well as FY27 earnings estimates, given the current global geopolitical scenario. The top line growth of Nifty 50 companies grew 5-6% in the last six quarters and was expected to grow in the mid teens in the next fiscal.
“Long-term value persists, however, near-term upside remains constrained due to ongoing geopolitical tensions, elevated crude prices, and continued rupee depreciation,” Vinod Nair, head of research at Geojit Investments, said. Investors are now awaiting policy decisions from major global central banks, such as the US Federal Reserve, European Central Bank, Bank of Japan, and Bank of England, “where guidance will be crucial in assessing the impact of the US-Iran conflict on the future interest rate outlook,” he added.
While market participants continue to bet on India’s long-term growth story, they are not hopeful that foreign investors will make a comeback anytime soon.
FPI Exodus
“Under the current scenario, there is no compelling reason for them to come back to India,” Dhananjay Sinha, chief executive officer and co-head of institutional equities at Systematix group, said. In the last 11-12 years, there has been only three years of strong foreign investor participation, he added.
Foreign portfolio investors (FPIs) remained net sellers in the Indian market on Wednesday, net offloaded shares worth ₹4,283.93 crore, according to data on the National Securities Depository. FPI holdings in Indian equities are at a 15-year low. Some of the reasons for their year-long selling spree include muted earnings growth, depreciation of the rupee, lower returns, elevated valuations, along with the latest geopolitical conflict in West Asia.
The advance-decline ratio on Wednesday was 2.80, with 3,169 gainers against 1,130 losers on the BSE. The near-term ease in jitters was also visible in the fear gauge, India VIX, which closed over 5% lower at 18.72.
Among sectoral indices, BSE Realty, BSE Information Technology, and NSE Telecommunications ended up to 2.8% higher, while the BSE Metal was the only one to end in the red, down 0.09%.
Coming to Sensex constituents, top gainers were HCL Technologies, Adani Ports & Special Economic Zone, Infosys, Tech Mahindra, and Zomato, ending 2.76-3.37% higher. On the other hand, major losers were ITC, HDFC Bank, Sun Pharmaceutical Industries, Hindustan Unilever, and NTPC which closed 0.30-1.29% lower.
