India's Bull Market Indicator Plunges As Risk Off Sentiments Weigh Stocks

The bullish sentiments that powered Indian benchmarks took a beating last week as geopolitical tensions, coupled with China's recovery, weighed investors.

India's bull-bear index—a market sentiment indicator—fell to the neutral zone from the extreme bullish zone a week ago, CLSA said in a note. The index reading was 54% bullish on Friday, down from 97% bullish a week ago.

The benchmark NSE Nifty 50 was down 4.5% during the week and underperformed regional peers. The equity indices recorded their worst weekly loss in over two years amid rising tensions in West Asia last week. All sectors except metals were in the red, with auto and realty being the worst performers.

Monetary stimulus unleashed by China has sparked a wave of tactical FII outflows from India.

China's CSI 300 is up 22% from its September lows to enter a technical bull market, according to Bloomberg. This led China to regain the influence it lost for over 10 months in the MSCI Emerging Market index.

Further, markets were also weighed by securities market regulator's measures introduced under its futures and options framework to strengthen the equity index derivatives market.

This was coupled with fears of a slowing economy as the tax collection saw a decline. Gross Goods and Services Tax collection growth in September reached a 40-month low of 6.5%. The eight core sectors' output growth declined in the latest reading.

Motilal Oswal Financial Services Ltd. said that India's medium-term growth narrative stands out in an extremely volatile global landscape. "Waters may get a bit turbulent for Indian equities in the short term."

Outcomes of the recent state elections, while not a needle mover, may keep the markets on edge, the brokerage said.

The NSE Nifty 50 and BSE Sensex rebounded from five-day decline at open on Monday, as Infosys Ltd., and Reliance Industries Ltd. led gains.

As of 09:59 a.m., Nifty was trading 53.3 points or 0.21% higher at 25,067.90, and Sensex was trading 275.11 points, or 0.34% higher at 81,963.56.