CIO Insights: This Diwali, Buy Nifty

It's been a tough Samvat 2081 for the Nifty, rising a meagre 6% (Diwali to Diwali), in the process under-performing most major markets globally. While there was a brief period of outperformance over March and April 2025, this has been completely unwound. A combination of weak earnings, dampened SIP flows, FII selling and more recently tariff risks, have all contributed to a lacklustre year. Adding to the woes has been currency depreciation reaching 6% recently. So will Samvat 2082 be any better? We believe so.‍

The index is breaking out after a 4-month congestion in a 4% range and is within a 2% striking distance to challenge all time highs (Sep'24). Not just in absolute terms, even relative to S&P and HSCEI, Nifty has solid momentum. Recent momentum is even more promising despite continued FII selling, albeit fading this month. A common view is that the market cannot go up without FII becoming net buyers - as followers of price, rather than flows, we believe an outperforming market will attract flows rather than the other way around. For now, large caps are expected to lead with leadership switching to banks and private banks in particular.

This Diwali, don't buy fireworks, Buy the Nifty!‍

Nifty - Breaking out above 25200 and within 2% of All Time Highs

source: Trading View

Relentless FII Selling over the Last Year - Has ebbed in Oct'25

source: MacroMicro

Nifty vs. SPX - Underperformance Reversing...

source: Trading View