November Market Review: Nifty 50 records 2nd month of decline, FPI outflows moderate; IT stocks outperform | Stock Market News

The Nifty 50 fluctuated widely in November, driven by concerns over stretched valuations, weak performance by Indian Inc in Q2 and persistent selloffs by foreign investors, causing the index to oscillate consistently between gains and losses.

The uncertainty was further exacerbated by global economic headwinds, including rising tensions between Russia and Ukraine, ongoing conflicts in the Middle East, the U.S. presidential elections, and India’s Assembly elections, leaving investors struggling to find direction.

Amid this uncertainty, the index ended the month with a mild drop of 0.31%, as strong support from domestic institutional investors and a slowdown in FPI selling helped contain the sharp decline. 

However, November marked the second consecutive month of losses for the Nifty 50, but it also recorded the smallest monthly drop of 2024. Of the 20 trading sessions, the index closed in the green on eight occasions and ended in the red on the remaining 12, with losses exceeding 1% on five days.

Also, the index touched a 5-month low in November, and its trading range narrowed from approximately 1,834 points in October to 1,274 points in November, while volatility gradually increased to 15 from 12 over the two months, following a stable four-month period around 13.

After a weak close in October, the Nifty 50 started November on a similarly subdued note. However, investor sentiment briefly improved following Donald Trump’s victory in the 2024 U.S. Presidential Election.

The rally, however, lost momentum as concerns mounted that his expansionary policies could result in a larger fiscal deficit, potentially affecting further Federal Reserve rate cuts, which led to a sharp rally in the U.S. Dollar Index, adding to the market’s volatility.

Additionally, the BJP-led NDA victory in the Maharashtra elections provided some relief to the market, raising expectations that the government would shift its focus towards reviving capital expenditure, which had been sluggish in the first half of FY25.

However, the rally was short-lived, as President-elect Donald Trump announced new tariffs on key trading partners, adding another layer of volatility to the markets. Furthermore, bribery allegations against the Gautam Adani added to the uncertainty, weighing on investor sentiment.

Among sectoral indices, Nifty IT emerged as the top performer in November, gaining 6.8%. The optimism surrounding Donald Trump’s victory boosted hopes that his corporate tax proposal could spur discretionary spending, potentially benefiting Indian IT companies, which derive 60–70% of their revenue from the U.S.

FPI outflows slow in November after sharp October sell-off

Foreign portfolio investors (FPIs) extended their selling streak in November, driven by concerns over expensive valuations, weak Q2 earnings, and diminishing expectations of a Federal Reserve rate cut in the upcoming meeting.

Interestingly, FPIs turned net buyers between November 23 and November 25, infusing ₹11,112 crore during this period. However, this buying momentum was short-lived as they quickly resumed their selling spree, offloading ₹11,756 crore the following day, followed by another ₹4,383 crore during Friday’s session. As a result, their total outflows for November amounted to nearly ₹46,000 crore, according to Trendlyne data. 

Despite the outflows, November’s selling activity was significantly lower than the ₹1.14 lakh crore withdrawal recorded in October, offering some respite to the markets and signaling a possible slowdown in foreign investor exits.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said, “Following weeks of relentless selling, FIIs staged a notable reversal at the beginning of the last week. This renewed enthusiasm can likely be attributed to the decisive victory of the BJP-led Mahayuti alliance in the Maharashtra Assembly elections.”

He said the resulting political stability appears to have strengthened investor confidence. Srivastava also pointed out that the rebalancing of MSCI’s key indices, which added a few select Indian stocks, likely played a role in this buying activity. Such adjustments necessitate realignment by passive funds to ensure their portfolios align with updated benchmarks.

Additionally, he mentioned that a glimmer of hope for a ceasefire between Israel and Lebanon may have positively influenced market sentiment from a geopolitical perspective.

“However, this buying momentum was rather short-lived, as the scenario soon reversed during the last two days of the week as FIIs once again went into a selling spree. Their change in stance was mainly driven by the rising US bond yields, strengthening dollar, and expectation of a slowdown in the domestic economy, which was later corroborated by the slowdown in the GDP number for the July-September quarter released postmarket hours,” he added.

Looking ahead, Srivastava remarked that foreign investment flows into Indian equity markets will depend on several factors, including the policies of Donald Trump’s presidency, the inflation and interest rate environment, and the evolving geopolitical landscape.

He also highlighted that third-quarter earnings performance and the country’s progress on economic growth would be crucial in shaping investor sentiment and influencing foreign inflows.

Economic data to shape market outlook in the coming week

Vinod Nair, Head of Research at Geojit Financial Services, expressed optimism about H2 earnings prospects, citing factors such as a good monsoon, the festive season, and an uptick in marriage-related spending. These factors, he believes, could help offset the earnings downgrades seen in Q2. Investors’ attention also turned to US and Eurozone inflation indicators, which will influence central banks’ December policy rates.

Nair noted that market stability in the near term will depend on the steadiness of incoming economic data next week. However, he cautioned that the recent dip in Q2 FY25 GDP growth to 5.4% could have lingering effects on market sentiment.

Looking ahead, he emphasized the significance of the upcoming RBI monetary policy announcement. While the consensus points towards a status quo, Nair suggested that the likelihood of a rate cut in February is high, given the subdued growth in Q2.

He added that other economic indicators, such as service and manufacturing PMI data, auto sales, and US job data, will also attract investor attention and shape market momentum.

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.