India’s benchmark Nifty 50 index declined 5.67% in September, marking its steepest fall since 2018, as global factors like US bond yields and oil prices, alongside domestic concerns, weighed on investor sentiment, prompting a shift towards defensive stocks and raising questions about the market’s outlook for the coming quarter.
India’s benchmark equity index ended September on a weak note, with the Nifty 50 falling 5.67% for the month and heading for its sharpest September decline since 2018, when it dropped 6.42%. The index closed at 22,716.20 on September 29, down from 24,080.40 at the end of August, and is now almost 14% below its 52-week peak of 26,373.20. Reuters-style market history compiled by Business Standard shows the move was a clear break from the previous three Septembers, when the gauge rose in each month apart from 2022. According to the same data, 40 of the 50 constituents were lower through September 29, underlining how broad the weakness has been.
Market strategists said the decline reflects more than a simple pullback in a headline index. Vinit Bolinjkar, head of research at Ventura, told Business Standard the sell-off echoed the liquidity squeeze seen in September 2018, although the causes are different this time. He pointed to stubbornly high US bond yields, a stronger dollar, foreign investor selling and the rotation of capital into cheaper regional markets and dollar assets seen as safer. He also said tensions in West Asia have lifted crude oil prices, adding to pressure on risk assets. Domestically, he argued, the market had been priced for perfection, but weaker readings in high-frequency indicators such as auto sales and railway freight have forced investors to reset earnings expectations. He also cited the weight of a large initial public offering pipeline and tighter rules on retail speculation as drains on market liquidity.
Technology shares were among the biggest drags on the index. Tata Consultancy Services was the worst performer among Nifty constituents in the Business Standard data, falling 13.70%, while Bajaj Finserv lost 13.31%, Wipro declined 12.43%, Shriram Finance fell 12.04%, Infosys dropped 11.52% and Maruti Suzuki slid 11.36%. Ashwini Shami, president and chief portfolio manager at OmniScience Capital, said the IT sector is facing structural pressure on revenue and earnings growth as artificial intelligence reshapes the industry’s business model. He added that valuations had remained high relative to the pace of growth, leaving the sector vulnerable once investors began to demand a better match between price and earnings prospects.
The weakness was not universal, however, and gains were concentrated in a small number of stocks. Adani Ports rose 9.45% during the month, while Dr Reddy’s Laboratories gained 5.77% and Coal India advanced 5.16%. ITC added 3.80%, HDFC Bank climbed 1.42%, Tata Steel rose 1.06% and Eternal increased 0.87%, with Power Grid also ending slightly higher. The pattern suggests investors have continued to favour defensives and select large-cap names even as the broader market has come under strain. Recent technical data published by market trackers also showed the index trading below both its 50-day and 200-day moving averages, a sign that momentum has weakened after the retreat from record highs.
For the October-December quarter, Sunny Agrawal, head of fundamental research at SBI Securities, said the key issue is not just the size of the fall but the number of pressures hitting the market at once. He said investors should watch crude oil, US bond yields, foreign portfolio inflows, the rupee, earnings revisions and market breadth. Within IT, he said, commentary on discretionary technology spending and deal conversions will matter, while for fast-moving consumer goods companies the crucial indicators will be festive-season volumes and broader consumption trends. Seasonal data also suggest September has often been a relatively favourable month for the Nifty in recent years, which makes this year’s drop stand out more sharply.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
