The Sensex and Nifty 50 touched 52-week highs of 85,290 and 26,104, respectively, on October 23, creating optimism about further gains. Stable Q2 earnings
and hopes of an India-US trade deal appeared to support this rally. However, the market soon saw profit booking across multiple sectors, putting the brakes on the upward trend. Both indices are now set to extend their losing streak into a second consecutive week. Corporate performance has largely met expectations, with sectors like oil marketing companies and metals exceeding forecasts. "Aggregate earnings are ahead of our estimates, with metals and mining and OMCs (oil marketing companies) driving the beat in the Kotak Institutional Equities (KIE) universe earnings print," noted Kotak Securities, as a Mint report. On the macro side, inflation is projected to remain low while GDP growth is expected to stay resilient, aided by lower crude prices and a strong monsoon. The RBI recently lowered its FY26 inflation forecast to 2.6 per cent and raised GDP growth estimates to 6.8 per cent, further reinforcing the economic backdrop. Why Markets Are Lagging Despite these positives, the market is weighed down by several headwinds. High valuations, large earnings downgrades over the past year, the absence of AI-driven growth plays, and persistent foreign capital outflows have hindered momentum. Since July, FIIs have sold approximately Rs 1.4 lakh crore of Indian equities in the cash segment. Pankaj Pandey, head of research at ICICI Securities, explains, "What we are seeing is a clear case of sector rotation. FII flows are still patchy, which is why the earlier rally, driven largely by private sector banks, autos, and IT, has now shifted to other pockets." Election And Trade Deal Uncertainties Additional domestic and global uncertainties, including the Bihar Assembly elections and stalled progress on the India-US trade deal, continue to spook investors. "There’s some anxiety around the Bihar elections, which has created uncertainty. The lack of progress on the India–US trade deal, despite earlier expectations, has added to the market’s nervousness. It’s really a combination of these factors that’s leading to the current volatility," added Pandey, states the report. While domestic indicators and corporate earnings remain largely on track, a sustained market rally may hinge on the resolution of external uncertainties and a meaningful return of foreign investors. the report added that the Nandish Shah of Motilal Oswal believes that with continued domestic reforms and potential easing of trade tensions, Indian equities are well-positioned to rebound: "We believe that the cavalry of measures by the government will help to reset the trajectory of corporate earnings as domestic reforms are expected to continue, while any resolution of the tariff stalemate will be a key external catalyst."
