Indian Markets Set to Refocus on Domestic Catalysts Amid FII Selling

Following the US elections, the Indian stock market turns its attention back to domestic issues, such as foreign fund flows and Q2 earnings. Despite mid-week recoveries, Indian indices closed lower, impacted by continued foreign investor selling. Watch for upcoming economic data and potential earnings recovery.

Following the conclusion of the much-anticipated US elections, the Indian stock market is poised to redirect its focus toward domestic factors, including foreign fund flows and the final phase of the Q2 earnings season. The past week saw markets consolidating, with indices losing over half a percentage point, indicating a persistent corrective phase. The week commenced with caution due to concerns preceding the US elections but saw a short-lived recovery mid-week post-results.

Nonetheless, the gains were unsustainable, leading key benchmark indices, the Nifty and Sensex, to close lower at 24,148.20 and 79,486.32, respectively. Ajit Mishra, SVP of Research at Religare Broking Ltd., noted, "With a significant global event now behind us, market attention will shift back to local factors such as foreign fund flows and the earnings season's final phase."

Indian markets have shown a tendency to react more to global risks while not fully participating in the positive global momentum. Despite a 4.5% rally in the U.S. markets post-election, Indian indices didn't mirror that trend. In the coming week, market participants will focus on high-frequency economic indicators such as IIP, CPI, and WPI inflation data. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed the Indian market's weakness to consistent foreign institutional investor selling, amounting to Rs 19,994 crore in November and Rs 94,017 crore in October. This trend may persist until data suggests a potential trend reversal with possible earnings recovery reflected in Q3 results and leading indicators. Deepak Jasani, Head of Retail Research at HDFC Securities, highlighted the continuing choppy trend of Nifty in the short-term, with consolidation likely to persist.

(With inputs from agencies.)