Sensex and Nifty 50 Struggle as Geopolitical Tensions Impact Market Sentiment

Geopolitical Tensions Weigh on Markets

The bullish sentiments that powered Indian benchmarks took a beating last week as geopolitical tensions, coupled with China's recovery, weighed investors. India's bull-bear index—a market sentiment indicator—fell to the neutral zone from the extreme bullish zone a week ago, CLSA said in a note. The index reading was 54% bullish on Friday, down from 97% bullish a week ago.

Market Performance Overview

• The benchmark NSE Nifty 50 was down 4.5% during the week, underperforming regional peers.
• Equity indices recorded their worst weekly loss in over two years.
• All sectors except metals were in the red, with auto and realty being the worst performers.

Impact of Foreign Investment

The monetary stimulus unleashed by China has sparked a wave of tactical FII outflows from India. Foreign investors have offloaded over Rs 41,700 crore from domestic stocks in the last five sessions. China's CSI 300 is up 22% from its September lows to enter a technical bull market, leading China to regain the influence it lost for over 10 months in the MSCI Emerging Market index.

Regulatory Measures and Economic Indicators

Markets were also weighed by securities market regulator's measures introduced under its futures and options framework to strengthen the equity index derivatives market. This was coupled with fears of a slowing economy, as tax collection saw a decline. Gross Goods and Services Tax collection growth in September reached a 40-month low of 6.5%, and the eight core sectors' output growth declined in the latest reading. One in four Nifty 500 companies are trading in a bearish zone.

Future Outlook

Despite the challenges, Motilal Oswal Financial Services Ltd. stated that India's medium-term growth narrative stands out in an extremely volatile global landscape.