Indian equities head into the Hindu new year on the back foot. The Nifty 50 fell 10.3% in Samvat 2082 up to October 23, according to Axis Securities. Expensive oil, rising interest rates, a weak rupee and heavy foreign selling all weighed on stocks.
The brokerage is not calling the bottom. "A market that has fallen for two straight months on an identifiable set of shocks tends to recover when those shocks reverse, not when sentiment merely improves," Axis Securities said in the report dated Oct. 26. It then lists what those reversals would look like.
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Where The Market Stands
The Nifty 50 ended Tuesday almost flat at 22,749.75, while the Sensex closed at 73,598.67. Both have recovered slightly from last week's lows but remain well below their levels a year ago.
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The pressures Axis describes have not gone away. Brent crude was trading at $114.89 a barrel on Tuesday, while the rupee was at about 95.07 to the dollar.
The Reserve Bank of India raised its repo rate by 25 basis points to 5.50% on Oct. 7 and shifted its stance to "calibrated tightening", saying rate cuts were off the table in the near term. Retail inflation rose to 5.54% in September, with food prices up 7.74%, statistics ministry data showed.
Foreign portfolio investors have sold a net Rs 46,748 crore of Indian equities so far this month, according to daily NSDL data up to Oct. 27. The selling has eased in recent sessions, with net purchases on three of the last five reporting days.
The Eight Triggers
Axis lists eight potential turning points, and oil tops the list. The brokerage wants Brent to fall towards $85-90 a barrel as tensions in West Asia ease, a move it says would lower input costs, support the rupee and lift sentiment. Oil marketing companies, paint makers, airlines, tyre makers, chemical companies and consumer businesses would gain most, it said.
The second trigger is a peak in interest rates. Moderating inflation and steady crude prices would help lenders such as NBFCs and housing finance companies, as well as automakers, real estate and consumer durables, Axis said. The RBI's next policy review is on Dec. 2-4.
The third is a return of foreign money and a steadier rupee, which would benefit large-cap financials, IT and consumer stocks. Axis cautioned that a sustained recovery would need flows to actually improve, "rather than valuation appeal alone".
A durable earnings recovery is the fourth. The brokerage will look at demand trends, margins, order inflows and management guidance in the September and December quarters, and wants consensus earnings estimates to stop falling.
The remaining four are a final India-US trade agreement, which Axis says is near finalisation according to the government and would help textiles, gems and jewellery and engineering goods; continued public spending in the Union Budget due in early 2027; resilient domestic inflows; and easing inflation.
Domestic investors have so far cushioned foreign selling. Monthly inflows through systematic investment plans hit a record Rs 32,490 crore in September, according to industry body AMFI. But Axis warned that "sustained market weakness could eventually affect retail risk appetite".
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Axis's Scorecard: Bullish Or Cautious?
The report also sets out specific signals that would change the brokerage's view. On Tuesday's readings, the market sits between the two, closer to the cautious end on oil and the rupee.
Axis said it would turn more positive if Brent fell and held below $95, and then $90, alongside a durable ceasefire. It also wants foreign investors to stay net buyers for two weeks with the rupee holding below 95 to the dollar, a threshold the currency is currently just above.
The Federal Reserve holding rates on Oct. 28 without signalling a December hike would also help, as would September-quarter margins holding up and cuts to FY27 earnings estimates staying in low single digits.
On the other side, Axis would grow more cautious if Brent held above $115 or shipping through the Strait of Hormuz was disrupted again. Both the RBI and the Fed raising rates in December would be a warning sign, as would inflation exceeding the RBI's projected peak of 6% for the October-December quarter.
The brokerage also flagged a technical level. A decisive Nifty close below 22,200, accompanied by renewed foreign selling, would make it more cautious. The index is currently about 2.5% above that mark.
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