The domestic benchmark indices, Nifty 50 and Sensex, have remained flat over the past year, hugely underperforming most major markets. The subdued performance of the Indian stock market has been shaped by factors like valuation fatigue, tepid earnings growth, Trump tariffs, geopolitical tensions, declining foreign institutional investor (FII) flows, macroeconomic challenges, and sectoral shifts.
As Muhurat trading approaches, the market appears to be in a consolidation stage, believes experts. In October, there are no positive indicators in sight, which can push the market sharply higher. If the US-India trade deal materialises with the removal of the penal tariff and lower reciprocal tariffs, that would be a shot in the arm for markets. But there is no clarity on the timing of this, according to analysts.
“Markets have been swinging between euphoria and unease — a cocktail of Trump-led global uncertainty, India’s GST cut stimulus, and the festive season’s pent-up consumer aggression. Credit card spends are exploding as Indians adopt a ‘live to fight another day’ mindset on expenses. Add to that rising gold prices and shifting macro winds, and you get a market driven more by sentiment than spreadsheets,” said Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund.
The primary reason for the benchmark indices underperformance is attributed to massive FII outflow by experts. Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd highlighted that the sustained and massive selling by FIIs has touched ₹203,455 crores by 13th October 2025.
This FIIs selling, in turn, has been triggered by the elevated valuations in India (Nifty 50 is trading above 21 times FY26 estimated earnings) and the cheap valuations in other markets like Hong Kong, China, South Korea, Taiwan and Brazil.
Further, brokerage house, Nuvama Institutional Equities pointed out that the most significant shift in the past year has been the notable decline in earnings, as margin expansion has come to a halt. The top line continues to be weak amid a widespread slowdown.
In the past year, the brokerage house noted that domestic institutional investor (DII) inflows have consistently been robust, even in the face of disappointing past performance, and that valuations continue to be high.
Similarly, VK Vijayakumar added that sustained DII inflows, particularly SIPs rising above ₹29,300 crores in September have the potential to support the market. In the coming months there will be news of higher consumption driven earnings recovery. That will help the market to turn bullish.
Market Outlook
Mohit Gulati believes that the roaring IPO subscriptions — like LG’s — only underline a deeper truth, and India doesn’t quite know where to park its surplus capital anymore.
Realty is sky-high, gold and silver are at lifetime highs, foreign education and leisure spends are on pause — so the great Indian roulette table, aka the Nifty 50, has become the only game in town.
After all, there are only so many 2- and 4-wheelers a family can buy — GST cuts have spurred demand but also clogged used-vehicle values, elongating replacement cycles. Markets, meanwhile, remain the one indulgence that still feels justifiable.
Brokerage Nuvama indicated that, even with a year of flat returns and easing policies, the risk-reward scenario appears unappealing. This is attributed to the continuing cycle of earnings downgrades, driven by challenges from exports and a reduction in government spending, which may counteract the benefits of GST cuts. Additionally, valuations continue to be high, both in absolute terms and when compared to bond yields, suggesting a need for caution.
“Reiterate Downgrade BFSI; Upgrade IT- In terms of portfolio positioning; we think its time to churn. We recommend a contra OW on IT, given low relative valuations and earnings expectations, 4% dividend yield and INR support. At the same time, we think its time to book profits in BFSI as credit growth revival still looks unlikely and credit costs risks start to emerge,” said the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
