Nifty, Sensex defy Asia-wide selloff, stand tall in sea of red this quarter

The benchmark indices Nifty and Sensex have defied an Asia-wide selloff this quarter, with most key Asian markets, including Japan, China, South Korea, Taiwan and Singapore, plunging as the artificial intelligence (AI) trade weakens. Attractive valuations and strong September quarter earnings growth have helped Indian equities outperform their Asian peers. A reversal in foreign investor flows has provided further support, with foreign portfolio investors (FPIs) turning net buyers in November, purchasing shares worth Rs 14,863 crore in just a few trading sessions.

Data showed South Korea's Kospi lost 20 per cent during the period, while Japan's Nikkei 225 declined 7.25 per cent. Taiwan's Taiex slumped 15 per cent and Singapore's Straits Times Index fell 7 per cent. China's Shanghai Composite slipped 4 per cent, while Hong Kong's Hang Seng remained flat. Overall, the MSCI Asia Pacific index declined 7 per cent, highlighting the 14-percentage-point outperformance by Indian benchmarks, with the Nifty and Sensex gaining 6.7-7.4 per cent during the same period.

Nomura said India's outperformance is supported by low starting expectations, reflected in valuations below post-pandemic averages across most sectors, and by the correction in AI stocks, Nomura said in a strategy note.

A possible LTCG cut for foreign institutional investors, the fall in global yields and expectations of the rupee holding up on central bank intervention may lend further support.

"Oil prices remain a concern, although they have also corrected 7 oer cent from the recent peak. This momentum could take the Nifty past our March 2027F target of 24,000, based on 17 times FY28F EPS. From a longer-term perspective, we think market concerns around geopolitical and technological uncertainty persist, weighing on long-term growth expectations," Nomura said.

Earnings growth recovery
Earnings of the 35 Nifty companies that have declared results so far have grown 22 per cent YoY against MOFSL's estimate of 20 per cent YoY, led by Reliance Industries Ltd, JSW Steel Ltd, ICICI Bank Ltd, Coal India Ltd, and Axis Bank Ltd. These five companies contributed 59 per cent to the incremental YoY earnings growth.

"Corporate earnings have sustained their growth momentum in 2QFY27 so far, building on a meaningful recovery witnessed in 1QFY27 after two years of muted performance. More importantly, the recovery is not merely reflected in aggregate earnings growth but is increasingly broad-based across sectors, despite persistent commodity cost pressure and an uncertain global environment," MOFSL said.

FPI flows turn positive
Global funds have infused about $3 billion into Indian stocks on a net basis since mid-October, Bloomberg reported. NSDL data showed FPIs bought Rs 14,863 crore worth equities this month against a total of Rs 34,843 crore outflows in October and Rs 35,861 crore outflows in September.

Alongside strong corporate earnings, Nomura expects relative sentiment towards Indian equities among foreign investors to improve, driving portfolio flows in the near term.