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Nifty saw first time correction of over 5% in a month since COVID fall of March 2020. The correction was mainly driven by weaker Q2FY25 results, withdrawal of money from market in the form of large IPO, QIP promoter and PE fund selling and all this fuel by one of the highest selling by FII. In the last monthly meeting we had cautioned that this quarter result will be weaker and will lead to downgrade of earnings.

The softer performance of corporate and even economy is mainly driven by lower spending by government specially on capital expenditure side, tight money supply into the system leading to lower deposit and credit growth, Softer demand from international market and excess rain leading to disruption in supply chain. Expectation of Trump winning the election lead to dollar appreciation and in turn selling by FII apart from moving money by FII from India to China / Hong Kong in expectation of stimulus by Chinese government.

Going forward we expect government expenditure will come back to complete the budget target, above normal rainfall will lead to revival of consumer demand especially in rural area and the interest rate cut by FED and action by new government in US is likely to revive demand for export sector. Valuation has come off from peak but because of down grade in earning still look elevated. Key point is when FII stop selling. We feel post US election and announcement of Chinese stimulus, we will see stability in dollar and also FII selling can reduce.

We expect November month to see volatility with Nifty range being 23400 to 24400. Any good correction can be used to accumulate the stock as we will be seeing revival of results from Q3 onward.

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