Bulls on Backfoot as Indian Stocks See Longest Decline Since March

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Good morning, this is Alex Gabriel Simon, an equities reporter in Mumbai. Indian equity investors are finding no relief, with the Nifty now declining for seven sessions in a row — the longest such streak since March. September is also shaping up to be the fifth straight month of trailing other Asian markets, something last seen back in 2013. With a new month kicking off tomorrow, investors are crossing their fingers that consumption tax cuts and lower interest rates can finally bring some cheer in the final three months of 2025.

Passive buyers step in as active managers exit

While foreign investors continue to sell Indian equities — often to buy into other markets such as China — flows into exchange-traded funds are signaling a change in sentiment. US-listed India ETFs have seen inflows for the fourth straight week, reversing their trend of outflows. This shows that passive allocations to India are starting to pick up, even as active players such as Invesco cut their exposure in favor of Chinese shares. A potential drop in the US market’s dominance could shift global money and likely bolster Indian stocks since valuations have eased in recent weeks.

Autos face a slow road to recovery

While capital flows into India may be improving, investors must be selective. A Nifty gauge of auto stocks fell for the fourth straight session Monday, its longest losing streak in over seven months. Investors had rushed to buy these shares, expecting a big boost from the recent cut in goods and services tax, even before buyers showed up at showrooms. While strong demand from construction, mining, and the festive season demand is good news for vehicle sales, analysts from ICRA warn that dealers have too much inventory. This suggests that any sales recovery will be slow. ICRA expects only moderate growth for both passenger cars and commercial vehicles.

Green energy to fire up demand for engineering firms

Investors looking beyond near-term consumer weakness are turning to engineering and capital goods. India’s push for renewable energy and power grid upgrades is expected to keep demand for high-voltage transformers strong through the decade, according to Nuvama analysts. They believe new capacity won’t hurt pricing or margins until after fiscal 2028, and a downcycle is unlikely due to sustained demand. Also, rising power use and the replacement of old plants could drive extra spending on thermal power projects — an estimated 15 GW to 20 GW more than the planned 97 GW by fiscal 2035. Nuvama’s top stock picks: GE Vernova, Hitachi Energy, CG Power, BHEL and Larsen & Toubro.

Analysts actions:

Three great reads from Bloomberg today:

And, finally.. 

A gush of new stock listings doesn’t automatically translate into market-beating returns for investors. In yet another sign of this, the BSE gauge that tracks newly listed companies is down this year, versus the main Sensex’s gain of about 4%, data compiled by Bloomberg shows. More than a third of the gauge’s 87 members are currently trading below their IPO issue prices. Notable names such as Laxmi Dental and Carraro India are down over 25% from their original sale prices.

--With assistance from Kartik Goyal and Ashutosh Joshi.

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