FII selling is continuing, and we cannot say that the market has formed a bottom unless FIIs start buying again. Yesterday, everyone was excited about the ceasefire between Iran and the US, but despite that, FIIs were still net sellers.
So the question is: is there any real connection between FII selling and geopolitical events like war? If yes, then why were FIIs selling even before these events? FIIs have been selling consistently for the last 1.5 years. In between, factors like Trump tariffs and geopolitical tensions like war have come and gone—but are these really the main reasons for the selling? Or is it primarily due to high market valuations, which I have been emphasizing repeatedly?
Since the beginning of this bear phase, my view has been simple: FIIs are selling mainly because of elevated valuations. DIIs, on the other hand, have not allowed the Nifty 50 to correct to attractive levels. Nifty 50 has been supported and kept near all-time highs by DIIs over the last 10 months.
I was expecting the Nifty 50 to correct to around 21,600 levels, which I consider an attractive zone where the P/E ratio would be @ 19. However, DIIs have continued to support the index.
Even today, the Nifty 50 faced selling pressure, while the Smallcap 250 index remained positive. This indicates that the Smallcap 250 index have already formed a bottom.
I personally believe that the market could form a bottom within this month, which may lead to a strong move starting from May.
During this market correction, three sectors are emerging as clear winners: power transmission, data centers, and pharma. I have mentioned these sectors in many of my previous posts and have also shared specific stocks within them.
This clearly shows that certain sectors and stocks can still outperform even when the broader market is under pressure. This is a stock-picker’s market. If you understand businesses and sectors well, you can identify winners even in a falling market.
As I have said many times, we are close to bottom formation. The downside risk from here appears limited, while the upside potential is significant. Even if the market falls further, the recovery is likely to be sharp—especially in small-cap stocks.
The Q4 earnings season has just started, and the next move in the market will be stock-specific, driven by earnings performance. I expect a strong rally from next month as the majority of companies announce their Q4 results.