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Below the Quote on Market by Krishna Appala, Sr. Research Analyst, Capitalmind Research

Indian markets continued their rally this week, hitting fresh all-time highs and gaining around 1.1%. Metals took the spotlight, with CNX Metals rising by over 6%, making it the best-performing sector, followed by CNX Auto, which gained 3.5%. However, the initial momentum in Bank Nifty following the Fed rate cut didn’t hold, leaving the index flat by the week’s end.

We are now witnessing a phase of sector rotation. Large-cap stocks are receiving more inflows compared to mid and small-caps, which had been market favourites until recently. Sectors like Public Sector Banks, Defence, and Railways, which saw heavy participation earlier, are gradually being overshadowed by underperformers such as Pharma, Private Banks, and mid-size IT. These sectors, with their attractive valuations, are likely to lead the next market phase for the coming quarters.

Meanwhile, Foreign Institutional Investors (FIIs) are making a strong comeback, pumping nearly Rs.50,000 crore into the Indian markets in September alone. This marks the second-largest monthly inflow in the last three years, trailing only December 2023. FPIs have also shown a growing interest in Indian debt, with Rs.18,000 crore flowing driven by the inclusion of Indian bonds in JP Morgan’s index. With large-cap valuations remaining attractive and FIIs returning in force, the outlook for the market remains positive.

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