Sharp Cuts! 70% of Nifty50 stocks tumble over 10% from recent highs as selloff intensifies

The sell-off in Indian stocks is showing no signs of abating, as bearish sentiment continues to grip the market. In Friday's trade, October 25, the Nifty 50 index, which represents the country’s top 50 blue-chip companies across various sectors, tumbled another 1.25%, or 295 points, to 24,093.

Today's drop has pushed the index to its lowest level since mid-August, representing a correction of 8.3% from its recent peak of 26,277, which it touched in late September. In October alone, the index has experienced a decline of 6.60%, marking the largest monthly drop since March 2020.

Notably, the downward pressure in October has been largely confined to Indian equities, while Asian stocks continue their upward momentum. Meanwhile, U.S. markets have been rallying sharply, reaching new record highs, driven by strong corporate earnings and robust economic data.

35 Nifty 50 stocks drop up to 39% from 1-year peaks

This recent sell-off has resulted in 35 constituents of the index to trade between 10% and 39% below their recent one-year peaks as per the Trendlyne data. Among this list, IndusInd Bank leads the way, trading 39% below its recent high of ₹1,694. In today's trade alone, the stock fell nearly 20%, marking the biggest intraday slump in recent times after it disappointed investors with its September quarter results.

Adani Enterprises is another stock that is down 28% below its recent one-year high of ₹3,743.90 per share. Adani Ports & SEZ is trading 18.73% lower than its recent highs.

On the other hand, Tata Motors shares have been in a downward spiral for the past two months. In September, the shares plummeted by 12.30%, marking the largest monthly decline in two years. This downward trajectory has continued into October, with the stock dropping another 11.36% so far this month.

At current levels, Tata Motors is trading at a 27% discount from its recent high of ₹1,179. The persistent drop in sales volume, combined with a cautious outlook from analysts due to falling demand for passenger vehicles (PVs), has negatively impacted investor sentiment, leading to a substantial correction in the stock price.

Other Tata Group stocks, including Tata Consumer Products, Tata Steel, Titan Company, and Trent, are trading 22%, 21%, 16.13%, and 13.37% below their respective one-year highs.

Meanwhile, stocks of car makers such as Maruti Suzuki and Mahindra & Mahindra have also tumbled, falling 16.54% and 15.55%, respectively, from their 52-week highs. Two-wheeler manufacturers like Bajaj Auto and Hero MotoCorp are trading at discounts of up to 22%.

FMCG giants Nestlé India and Hindustan Unilever have also seen sharp corrections after posting their recent September quarter numbers, with their stocks now trading 18% and 17% lower, respectively, from their recent 52-week highs.

The FMCG sector has been the worst-performing sectoral index this month, plunging 10% so far—marking its largest monthly decline since 2008. Even during the peak of the COVID-19 pandemic in March 2020, the index fell only 7%, due to its typically defensive nature. However, it is now struggling to withstand the intensity of the recent sell-off.

What’s behind the Indian market’s recent weakness?

The recent slump in Indian shares has been largely driven by weak September quarter results across key sectors. FMCG companies, hindered by a slowdown in rural consumption, reported earnings below estimates, while banks are dealing with high slippages and deteriorating asset quality, both of which have unsettled investors.

Auto companies are also facing slower sales growth, particularly among car makers, with subdued projections for the upcoming festive season further dampening investor sentiment and triggering significant selloffs across the auto sector.

However, the IT sector is showing some positive momentum. Demand from key markets like the U.S. and Europe is gradually recovering, and central banks have begun easing interest rates, signalling further stability.

Strong earnings from global investment banks, a major revenue source for IT companies, have also boosted investor sentiment, providing some resilience in an otherwise turbulent market.

Meanwhile, weak earnings and Chinese stimulus measures have also fueled selling by foreign portfolio investors (FPIs). In October alone, FPIs have withdrawn a record ₹97,205 crore from the Indian market, marking the largest monthly outflow on record.

Additionally, rising tensions in the Middle East, fading hopes for a substantial rate cut by the U.S. Federal Reserve, extreme valuations, a strong rebound in Chinese stocks, and uncertainty surrounding the upcoming U.S. election are also weighing on the markets.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.