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After three turbulent months of foreign outflows, Dalal Street has staged a spectacular comeback; Will bulls take charge?
Market Outlook
Market Outlook: After three turbulent months of foreign outflows, Dalal Street has staged a spectacular comeback. The Sensex surged 4,159 points, a 5% jump, this October alone, driven by a sharp U-turn from foreign institutional investors (FIIs), who infused over Rs 7,300 crore into Indian equities. The benchmark index now hovers just 1,552 points below its all-time high of 85,978, while the Nifty trails its record by a mere 410 points.
The recovery has sparked optimism among market participants, with five consecutive sessions of gains prompting speculation over whether this Diwali rally signals the start of a new bull cycle or is merely a festive surge. The rally has largely concentrated in frontline stocks, with Nifty Bank climbing over 6% in October, while midcap and smallcap indices recorded moderate 3–4% gains, indicating the broader market is still finding its footing.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted that the sharp decline in India’s earnings growth to 5% in FY25 (from an average of 24% over the prior three years) was the key factor behind the previous underperformance. However, with early festive-season sales of automobiles and white goods showing robust growth, he expects earnings growth to rise to 8–10% in FY26, potentially accelerating to 15% in FY27. Vijayakumar cautioned that long-term market trends remain tethered to earnings performance.
Vinit Bolinjkar, Head of Research at Ventura Securities, targets 27,600 for Nifty and 90,100 for Sensex this Samvat, noting that the weak FY25 earnings trend appears to be bottoming out. Domestic consumption-driven earnings, a potential US–India trade deal, and ongoing fiscal and monetary support—including rate cuts and increased government capex—are likely to support further upside. Nifty currently trades at a CY26 forward P/E of 18x, only slightly above its long-term average of 17x, suggesting limited downside.
During Tuesday’s special Muhurat trading session, Nifty Midcap150 rose 0.2%, while Nifty Smallcap 250 advanced 0.7%. Out of 4,178 BSE-listed stocks, 3,023 advanced and 954 declined. Cipla led the NSE gainers, rising 1.6%, followed by Bajaj Finserv (+1.2%), and Infosys, JSW Steel, and Grasim Industries (+0.7% each).
Vikas Khemani, Founder and CIO of Carnelian Asset Management, sees a high probability of Nifty reaching 29,000–30,000 by the next Samvat. He also expects significant FII inflows, driven by potential Fed rate cuts favoring emerging markets, with India likely a major beneficiary.
After three months of selling stocks worth Rs 76,600 crore, FIIs returned as net buyers in October with inflows of Rs 7,300 crore. Alok Agarwal, Head – Quant and Fund Manager at Alchemy Capital, noted that FIIs’ current underweight stance on India—the highest since 2009—could reverse, given stabilizing earnings and an attractive risk-reward scenario.
Earnings trends support this optimism: Nifty EPS downgrades have steadied, showing a marginal 1% uptick, signaling that earnings may have bottomed out, with H2FY26 expected to benefit from a consumption revival. Seshadri Sen, Head of Research at Emkay Global Financial Services, anticipates positive momentum to continue, though the real test lies in the ongoing Q2FY26 earnings season. Sen remains overweight discretionary stocks and underweight financials and staples.
Market Outlook for October 23, 2025
As trading resumes after the Diwali Balipratipada holiday, the Sensex and Nifty continue their bullish momentum, supported by FIIs, positive corporate earnings expectations, and festive optimism. Sensex last closed at 84,363.37, roughly 1,600 points below its all-time high, while Nifty ended at 25,843.15, about 410 points shy of its record. Banking, FMCG, and energy sectors are leading gains, with Reliance Industries and Axis Bank among top contributors, and midcap and smallcap indices showing modest recovery.
On the derivatives front, GIFT Nifty indicates a positive start, signaling early optimism for the session. Technically, Nifty support lies between 25,800–25,400, with resistance at 25,900–26,500. Sensex support ranges from 83,303–82,648, with resistance near 85,423–86,079. Investors will watch corporate earnings, FII flows, and global cues closely, as these factors are likely to shape market direction in the near term.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
October 22, 2025, 11:14 IST
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