Pulse of the Street: Foreign buying fuels rebound, oil risks linger
The stock market clocked gains in October after two straight months in the red, as foreign investors returned in the just-ended week. Healthcare stocks led gains during the week, even as high oil prices continue to cloud corporate earnings.
After the sell-off in the precious week, the Sensex rose 1.8% and the Nifty 50 2% over the week. The recovery helped the Sensex finish October 2.7% higher, ending a two-month losing streak after declines of 5.8% in September and 1.5% in August. The Nifty rose 1.9% in October, after declining 6.1% in September and 1.2% in August.
On Friday, the Sensex gained 0.42% to 74,459.53, while the Nifty advanced 0.51% to 23,053.1.
Foreign portfolio investors bought more than ₹14,000 crore of equities during the week, including primary-market investments. Domestic institutional investors bought another ₹7,062 crore. Indian equities found dual triggers this week as the country's largest IPO, Jio Platforms, delivered a strong debut, listing at 21.4% above its issue price. Meanwhile, the market found some solace as the US Federal Reserve held interest rates steady, though it maintained its caution on inflation.
Foreign buying returns
The week’s purchases offered some relief, but foreign portfolio investors still sold a net ₹34,843 crore of Indian equities in October, according to NSDL data.
“We do not anticipate an aggressive return of foreign institutional flows in the near term,” said Siddharth Purohit, fund manager at InvestValue, citing elevated crude prices and rupee depreciation as key concerns. Yet, rising foreign participation in several mid-sized companies suggested investors were selectively buying businesses with stronger earnings prospects.
Vinit Bolinjkar, head of research at Ventura, was similarly cautious. “I would call it a rebound for now, not yet a trend,” he said. For buying to continue, crude would need to cool, US yields must remain stable, and the rupee should hold steady. Domestic investors and systematic investment plan flows had helped cushion the market during foreign selling, he added.
However, Ashwini Shami, president and chief portfolio manager at OmniScience Capital, expected foreign buying to continue. The correction had made valuations attractive in some pockets, while easing US Treasury yields and the Fed’s pause supported fresh allocations, he said. Yet, expensive oil and geopolitical uncertainty could keep markets volatile.
Healthcare leads
Most of the sectors ended in green this week. The was led by BSE Healthcare that rose 6.9%, followed by utilities at 5.8%. Services, power and realty each gained about 3.9%, while energy fell 0.9%.
Purohit linked healthcare’s gains to encouraging September-quarter earnings and resilient business fundamentals. Its defensive characteristics also made the sector attractive during market volatility.
Power and utilities recovered after sharp losses from the previous week. Strong order books continued to support their earnings outlook, describing the correction as profit-booking and an adjustment in valuations rather than a deterioration in business conditions, he said.
Bolinjkar attributed some of the recovery in power, utilities and realty to bargain buying. Whether the gains last would depend on earnings and valuations, adding that realty segment warranted more caution because of its sensitivity to interest rates.
Shami also favoured power and utilities, alongside banks, housing finance companies and infrastructure-focused non-bank lenders.
Global markets diverge
India joined gainers across several global markets, although some posted stronger advances. South Korea’s Kospi gained 3.3%, Germany’s DAX rose 2.9% and France’s CAC 40 advanced 2.4%, all outperforming the Nifty.
The US S&P 500 gained 1.3%, while Japan’s Nikkei 225 and Hong Kong’s Hang Seng added about 1% and 0.9%, respectively. The UK’s FTSE 100 rose 0.4%.
Other Asian markets fell. Taiwan’s Taiex lost 1.8%, China’s CSI 300 declined 2.9% and Indonesia’s Jakarta Composite dropped 7%.
Oil remains a concern
Despite gains across several markets, expensive oil remained a concern for earnings. Brent crude spot traded at $111 a barrel on Friday, threatening to raise costs for companies even as September-quarter results offered encouragement.
Bolinjkar said businesses such as paints, chemicals, tyres and airlines faced higher input and transportation costs. Those unable to pass on the increases could see margins shrink. Expensive crude and a hawkish Fed could also restrict further market gains, increasing reliance on domestic buying and earnings.
Purohit warned that sustained crude prices above $110–112 could put pressure on India’s external balances and inflation. However, he believed share prices already reflected many of these risks, reducing the likelihood of another sharp market-wide fall.