Market corrections present buying opportunities for HDFCSky

Indian stock markets experienced a turbulent week as selling pressure persisted amid global uncertainty, resulting in the steepest weekly decline in over a month for benchmark indices. The Nifty fell by 2.7% while the Sensex recorded its sixth consecutive session of losses, reflecting a widespread risk-averse sentiment. Mid- and small-cap indices also tumbled, dropping by 2% and 2.1% respectively.

The announcement of a 100% tariff on branded and patented pharmaceutical imports by the U.S. government effective October 1 led to a significant selloff in Indian pharma stocks, contributing to sector-wide losses. Additionally, concerns regarding potential hikes in H-1B visa fees added pressure on IT stocks, fueling fears of margin compression for top Indian IT exporters.

Foreign portfolio investors (FPIs) divested stocks worth nearly Rs 19,570 crore during the week, marking a period of substantial selling. However, domestic institutional investors (DIIs) countered some of the downside with inflows of about Rs 17,410 crore, though they failed to entirely offset the pressure from FPIs.

All sectors ended the week in negative territory, with IT being the worst performer at -7.9%. Realty, pharma, consumer durables, and capital markets also experienced losses ranging from -5% to -6.1%. The broad-based decline suggested a shift from caution to capitulation, particularly in sectors exposed to global economic and policy changes.

In the U.S. market, investors were met with data-driven volatility as economic indicators clashed with evolving Federal Reserve policies. Despite setting record highs earlier in the week on positive corporate earnings and potential rate cuts, indexes turned negative following contradictory jobless claims and GDP growth data. Nonetheless, hopes for further rate cuts later in the year remained alive due to moderate inflation rates.

Looking ahead, the market correction presents an entry opportunity for patient investors, with most NSE stocks trading at least 20% below their 52-week highs. The upcoming earnings season from July to September is expected to show strong performance, supported by various factors such as softer commodity prices, banking sector strength, and robust demand in key sectors like auto and capital goods.

India’s economic outlook remains promising due to significant policy reforms, including the RBI’s reduction of the Cash Reserve Ratio and repo rates, as well as tax relief measures introduced in Budget 2025. With market weakness mainly driven by global factors rather than internal structural issues, investors have the chance to accumulate quality stocks at attractive valuations for potential growth over the next 12-18 months.