Will Indian Markets Maintain Momentum After Samvat 2083 Rally?

Indian stock markets have shown a remarkable late surge this Deepavali season, sparking renewed optimism among investors. The Nifty 50 index climbed more than 9 percent over seven trading sessions, driven by easing crude oil prices, increased foreign investment, and hopes for reduced geopolitical and trade tensions following the recent US mid-term elections. Despite this impressive rebound, the index remains below its level from a year ago, highlighting the challenges markets still face.

Since Deepavali last year on October 20, 2025, the Nifty 50 has fallen by 3.15 percent, marking the poorest festival-to-festival performance since 2011. The broader Nifty 500 index also declined by 1.1 percent over the same period. This raises the question of whether the current upward momentum can be sustained into Samvat 2083, the traditional New Year in the Indian calendar.

Historical data provides some encouragement. An analysis by bl.portfolio looking at Deepavali-to-Deepavali market returns since 2000 reveals that years of negative performance are often followed by gains. The exceptions were three consecutive years from 1999 to 2002 when the Nifty fell between 8 and 13 percent each year. However, these declines were succeeded by strong recoveries, including a 58.19 percent rally from Deepavali 2002 to 2003 and an extraordinary 91.53 percent surge between Deepavali 2008 and 2009, as markets bounced back from the global financial crisis. More moderate recoveries of around 9 to 10 percent followed similar downturns in 2012, 2016, and 2023.

The Nifty 500 also saw rebounds in five of six past instances, notably gaining more than 100 percent between Deepavali 2008 and 2009. While these trends offer some hope, they do not guarantee that the current recovery will follow the same path.

The recent market rally has been significant. In the week ending November 6, 2026, the Nifty 50 rose 8.58 percent, marking its strongest weekly gain in nearly six years. Several factors supported this turnaround, including falling crude oil prices, fresh foreign inflows, and shifting global sentiment. The correction in US technology stocks has sparked speculation that investors might redirect funds to emerging markets like India, though sustained foreign investment remains uncertain.

Domestic institutional investors also played a key role. Foreign institutional investors (FIIs) withdrew approximately ₹2.76 lakh crore from the market between Deepavali 2025 and November 5, 2026, while mutual funds invested ₹5.37 lakh crore in the same period. Compared to the previous year, FII outflows increased, but mutual fund purchases also rose, providing some stability.

Valuation metrics reveal mixed signals. The Nifty 50’s trailing price-to-earnings (P/E) ratio fell over 9 percent from 22.72 to 20.65 times earnings. The Next 50, Midcap 150, and Microcap 250 segments experienced even sharper P/E contractions between 17 and 20 percent, despite positive returns, suggesting earnings growth outpaced price increases. However, valuations are still relatively high in some areas, with the Smallcap 250’s P/E rising slightly from 30.77 to 31.99 times.

The sustainability of this rebound heavily depends on corporate earnings growth, which could be influenced by geopolitical events and the pace of investments in artificial intelligence (AI). A recovery supported by stronger profits and stable valuations would be more durable than one driven only by renewed investor enthusiasm.

Global market conditions remain a concern. The sharp downturn in US technology stocks has raised doubts about returns from large AI investments, potentially prompting foreign investors to reduce exposure to emerging markets, including India. Elevated US bond yields amid inflation and fiscal challenges could also pressure equity valuations and foreign fund flows. Additionally, a spike in crude oil prices or worsening geopolitical tensions might increase domestic inflation and limit prospects for monetary easing.

Domestic market performance has been uneven. While the Nifty 50 declined 3.15 percent over the past year, other indices fared better. The Next 50 rose 3.18 percent, the Midcap 150 increased 1.58 percent, and the Smallcap 250 gained 1.27 percent. Microcaps led with a 5.42 percent advance. Sector-wise, pharma and metals were strong performers, each rising over 24 percent, and capital markets stocks surged 22.1 percent. However, FMCG and IT sectors declined by 17.3 and 6.6 percent respectively, continuing their downward trend from the previous year.

Despite pockets of strength, many individual stocks suffered. Of the 481 stocks in the Nifty 500, 272 (56.5 percent) posted negative returns, and 129 stocks lost more than 20 percent. The median stock declined 5.15 percent, significantly more than the benchmark’s 1.09 percent decline.

History also shows that recovery years can be volatile. In five positive years following negative returns, the Nifty experienced peak-to-trough declines of 10 to 19 percent, with a median drawdown of over 15 percent. This year’s maximum drawdown was 15.56 percent, even though the index closed the week before Deepavali 2026 only 3.15 percent below its previous year’s level.

Looking ahead, the outlook for Samvat 2083 is cautiously positive. The recent rally has improved sentiment, but risks such as a global sell-off triggered by AI concerns, rising bond yields, foreign selling, and potential earnings disappointments remain. Past experience suggests that chasing prices after a sharp rally can be risky, and valuations will continue to play a crucial role in market direction.