Investors faced a tough week on Dalal Street as both the Sensex and the Nifty headed for a weekly decline of nearly 7% each.

On Friday, the S&P BSE Sensex fell 800 points in intraday trade, dropping below the 80,000 mark for the first time in two months. Around 1:40 PM, it was down 821.20 points at 79,243.96, while the NSE Nifty50 was down 299.40 points to trade at 24,100.

Broader market indices, including mid-cap and small-cap stocks, also bore the brunt of the market downturn. Most of the small-cap indices fell over 2% during intraday trading, fully reflecting the jitters on Dalal Street.

This year’s run-up to Diwali has been particularly tough for benchmarks, with the Sensex and Nifty heading for their biggest October decline since the 2020 Covid-induced crash.

DECODING THE BLOOD BATH SCHOLARSHIP

According to experts, several factors contributed to the market turbulence, with heavy selling by Foreign Institutional Investors (FIIs) being one of the most pressing concerns.

“There has been no respite from FII selling in local stocks this month, which has created uncertainty among domestic investors,” said Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd.

So far in October, FII outflows have touched nearly Rs 1 lakh crore, with many investors targeting the Chinese market following a stimulus announcement.

Other contributing factors include rising inflation, weaker Q2 earnings, the upcoming US presidential election and heightened tensions in the Middle East. “Market sentiment remains tense ahead of the US presidential election on November 5,” explained Tapse, noting the potential impacts on key Indian sectors such as IT, pharmaceuticals and textiles. “A cautious outlook prevails, especially as Q2 corporate earnings disappointed.”

WHAT SHOULD INVESTORS DO?

The recent downturn suggests a change in the long-term market trend, according to Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“A distinct change in the long-term market trend is visible from recent market movements,” he observed.

Vijayakumar pointed out that the “buy on dips” strategy, effective since the Covid-19 low of 7,511 in March 2020, looks less effective against the backdrop of current FII flows, which have reached Rs 98,085 crore this month.

He added that downward revisions to FY25 revenue estimates and weak Q2 results turned market sentiment slightly bearish. On the other hand, sustained mutual fund flows are helping domestic institutional investors (DIIs) to absorb some of the selling pressure of FIIs.

This support, he noted, “may provide resilience to an otherwise weak market where, even after the 7% correction, there is no valuation comfort except in pockets such as large-cap financials.”

For investors navigating this volatile period, Vijayakumar suggests that growth stocks may provide more resistance.

(Disclaimer: The views, opinions, recommendations and suggestions expressed by experts/experts in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any investment or investment options. trading.)