Mirae Asset CIO Neelesh Surana notes that a 14% Nifty correction has brought valuations to more reasonable levels. While domestic demand remains a key support, investors continue to weigh the impact of persistent foreign outflows and global headwinds like high crude oil prices. The market's next move will likely hinge on upcoming corporate earnings and macroeconomic stability.
Indian markets have faced a challenging period, with the Nifty 50 index pulling back roughly 14% from its recent peak as of early October 2026. Neelesh Surana, Chief Investment Officer at Mirae Asset Mutual Fund, suggests that this correction has helped clear some of the over-exuberance that previously built up in the market, making valuations more attractive for long-term participants.
Valuation Shift and Market Correction
The index is now trading at a price-to-earnings (P/E) ratio of approximately 19.3x. This level sits about 12% below the 5-year median, signaling that stock prices have adjusted significantly relative to corporate earnings. For many investors, this shift indicates that the "valuation risk" that was prevalent earlier in the year has moderated. While the market has seen a brief rebound in early October, experts remain cautious about calling it a full recovery, given the persistence of global macroeconomic pressures.
Balancing Global Headwinds and Domestic Strength
Despite the improved valuation landscape, the market is navigating significant external hurdles. Foreign Institutional Investors (FIIs) have been net sellers in the Indian market, with outflows exceeding ₹44,000 crore in September 2026 alone. This exodus is largely driven by rising global bond yields, particularly in the US, which attract capital away from emerging markets.
Adding to the pressure are geopolitical tensions in West Asia and Brent crude oil prices, which have remained elevated above $100 per barrel. Higher oil prices can impact India’s current account and increase inflationary pressure, affecting the broader economy. However, this selling pressure has been partially absorbed by robust buying from Domestic Institutional Investors (DIIs), who have provided a structural buffer and prevented a deeper slide in the index.
What Investors Are Watching Next
As the market looks ahead, the focus is shifting toward the September-quarter corporate earnings season. Investors are looking for signs of stable profit margins, as high input costs continue to test corporate performance. The market is also sensitive to the Reserve Bank of India’s (RBI) monetary policy outlook, as any indication of future interest rate hikes could impact borrowing costs for companies and consumer demand.
The key monitorable for the coming weeks will be whether companies can maintain profit growth despite these pressures. While the domestic economy shows resilience in areas like auto and consumer spending, the sustainability of a market rebound will depend on a combination of stable quarterly results, a potential easing in global crude prices, and the return of foreign capital flows. For now, the sentiment remains balanced between the opportunity presented by lower valuations and the caution required by ongoing global volatility.