Indian Stock Market Rallies as Global Markets Crash Amid US Election Jitters
The Indian stock market rallied for the seventh consecutive session on Friday, gaining around 2%, even as markets across Asia and the US crashed amid jitters over US election results and concerns about a possible reversal of the AI boom. While some of these markets are on the verge of entering bear territory, Indian markets appear rejuvenated after a disappointing year so far. The Sensex rose to a nine-month high, while the Nifty 50 hit its highest level in eight months. The rupee also strengthened, reclaiming the 94-per-dollar mark on Friday after being among Asia’s worst-performing currencies this year. India gains as AI markets stumble The Indian stock market extended its longest winning run in a year on Friday, even as the US’ tech-heavy Nasdaq Composite index fell 5.5% — its biggest single-day fall in 19 months — as a resounding win for the Democrats in the US midterm elections deepened fears of tighter AI regulations and potential roadblocks to the construction of crucial data centres. Nvidia dropped over 9%, while Elon Musk’s Tesla and SpaceX fell 9-11%. Asian markets followed, with South Korea’s Kospi, Taiwan’s Taiex and Japan’s Nikkei 225 indices dropping 5-6%. In South Korea, SK Hynix plunged over 13%, while Samsung Electronics lost 6%. Meanwhile, the Sensex added 1,718.02 points, or 2.2%, to close at 81,028.02. The Nifty 50 ended 493.75 points, or 2%, higher at 25,030.35, crossing the psychologically crucial 25,000 level for the first time since February. Most sectors ended in the green, with banking, financial services and pharmaceuticals emerging as the top gainers. “The initial relief following the Democratic sweep of (the US) Congress has faded sharply amid concerns over tighter scrutiny of AI infrastructure investment,” noted analysts at MUFG Bank. “The 12% plunge in US semiconductor stocks risks triggering another wave of foreign equity outflows from foreign investors selling South Korea and Taiwan equities. While KRW (won) has remained relatively resilient this week, the severity of the tech selloff overnight could erode that resilience, despite the supporting external fundamentals,” the bank noted. With this, AI-driven stock markets have fallen as much as 45% from their peaks this year. While some of these markets are on the verge of entering bear territory, Indian markets look rejuvenated after a disappointing year so far, having fallen nearly 15% at their lowest. India emerges as anti-AI play “Global investors are reallocating within emerging markets. For most of this year, North Asia’s AI-heavy markets pulled money away from India, which was seen as having little exposure to the AI trade. Now that trade is unwinding sharply,” said Tanvi Kanchan, associate director at Anand Rathi Share & Stock Brokers. “So yes, part of this is an anti-AI play. Indian IT services companies are being treated as a relative safe haven, since they sell enterprise services rather than the AI hardware and data centres now in question,” she added. Data supports this positive mood. Foreign institutional investors bought stocks worth about $1.6 billion on Thursday, their biggest single-day net purchase in nearly six years. This follows two straight months of selloff in a year when foreign investors have dumped $29 billion worth of Indian stocks so far. The Indian market has not only been boosted by this “anti-AI” play but has also benefited fundamentally from the US election results. US election results boost India The Democratic win in the US lifted the Indian market 2.5% on Thursday on hopes that it would lead to a more permanent resolution to the crisis in West Asia. Crude prices fell to around $90 a barrel from around $115 a barrel a few weeks ago. “AI or no AI, India’s macro could look a lot better with lower oil prices,” said analysts at Kotak Institutional Equities. “We expect India’s macroeconomic position to improve dramatically over the next few months, as crude prices come down to ‘normal’ levels on likely improved supply-demand balance,” the report noted. While the reaction has been positive, concerns have not completely disappeared. Even as the Indian market continued its winning run, the India VIX index rose 13% and remains nearly double its level at the start of the year. The index, known as the market’s fear gauge, often indicates volatility, uncertainty and uneasiness among investors. Robust Q2 earnings For now, sentiment has also been boosted by better-than-expected earnings for the July-September quarter. According to Deepak Shenoy, CEO of Capitalmind Mutual Fund, median profit growth among the top 500 companies listed on the NSE was around 21% in the previous quarter. “With nearly 70% of results in for the Nifty 500, median profits are up 21.4% year on year,” Shenoy wrote in a post on social media platform X. “With the kind of earnings that have come, and we would like to believe that earnings are going to remain better in the next 1-2 quarters, then the current levels are quite good, given that the P/E (price-to-earnings) levels are attractive,” said Pankaj Pandey, head of research at ICICI Securities. The strong earnings performance can be attributed to sectors such as banking, financial services and insurance (BFSI), which have delivered healthy results. Fuel-sensitive sectors, meanwhile, have largely managed to pass on the higher costs arising from the West Asia war. The increased initial public offering (IPO) activity seen last month, which had diverted cash away from the secondary market, also appears to have cooled since Reliance Jio’s issue. There are currently no active mainboard public issues, according to the NSE website. So, while some underlying uneasiness remains in the market, these factors have helped put Indian equities in a relatively strong position after a difficult year so far.
