Can October turn the tide for Indian stocks after September rout?
As investors approach October, the landscape is shaped by high crude oil prices, increasing bond yields, and continued foreign selling. Historically, October has favored positive market returns, yet recent downturns could challenge this pattern. With the earnings season on the horizon, corporate profitability, particularly within large-cap stocks, will be under scrutiny.
Mumbai: As October approaches, investors must consider October's generally favorable performance for Indian equities alongside a challenging environment marked by high oil prices, rising bond yields, continued foreign selling, and a weakening rupee. Historically, the Nifty 50 has ended the month higher in seven of the past ten years.
However, this year's October may be a test of whether the recent September correction has sufficiently absorbed risk concerns or if additional adjustments are needed, according to Tejas Shah, Equirus Securities' director and head of trading. The Sensex and Nifty both fell 6% in September, with the BSE MidCap 150 and BSE SmallCap 250 indices dropping 6.6% and 3.2%, respectively, marking their worst monthly decline since March, when both indices plummeted 11%.
Seasonality typically benefits equities, driven by higher festive-season spending on automobiles, jewelry, and consumer durables. Additionally, the start of the fiscal year's second half, which often witnesses improved demand and volume growth, may contribute to October's favorable performance. The upcoming October quarter earnings season will also be closely monitored for indicators of enhanced corporate profitability, particularly among large-cap stocks that have lagged behind in the recent downturn.
While October has historically delivered average gains of around 1% for the Sensex and Nifty, and 1% and 1.4% for the BSE MidCap 150 and BSE SmallCap 250, respectively, analysts highlight that the Nifty faces significant obstacles near the 23,000 support level, which was breached during the recent sell-off. If the market can surpass this level, it may turn positive, with 23,000-23,100 now acting as resistance.
A rebound in the banking sector, particularly in private banks, financial services, and Bank Nifty, could provide a substantial uplift to the broader market.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
