Weak earnings, FII outflows weigh on BSE 500 as 75% stocks post negative or flat returns since last year

Of the 500 constituents, about 370 ended in the red, while another 50 were only marginally positive.

The domestic equity market has seen a sharp divergence, with nearly 75 percent of BSE 500 stocks delivering flat or negative returns over the past year.

Of the 500 constituents, about 370 ended in the red, while another 50 were only marginally positive. The BSE 500 slipped nearly 3 percent during the period, compared with a percent decline each in the Sensex and Nifty 50. Despite the broad correction, nearly half of these underperforming stocks still trade above their long-term price-to-earnings multiples on a one-year forward basis.

Analysts attribute the weakness to stretched valuations in several mid- and small-cap counters following their sharp rally in 2023–24. Subdued earnings—hit by weak rural demand, rising imports, and export challenges—have weighed further on sentiment, dragging even large-cap heavyweights in the benchmark indices.

Geopolitical concerns have added to the unease, with fresh US tariffs on Indian goods dampening foreign inflows. On the brighter side, the government’s move to prune GST slabs is expected to unlock consumption worth Rs 2–2.4 lakh crore, potentially boosting GDP growth. Analysts say stronger September-quarter earnings and improving macro signals could revive foreign institutional investor (FII) participation.

Global cues remain critical. Investors are eyeing the upcoming US Federal Reserve meeting, where a smaller-than-expected rate cut or hawkish commentary from Chair Jerome Powell could unsettle markets. However, experts caution that any short-term dip may open attractive long-term opportunities as valuations turn favourable.

Among the biggest losers in the BSE 500, Aditya Birla Fashion and Retail plunged over 74 percent, while Sterling and Wilson Renewable Energy and Tejas Networks dropped 64 percent and 54 percent, respectively. Other notable laggards include HFCL, Siemens, IndusInd Bank, Punjab & Sind Bank, Natco Pharma, Praj Industries, Ola Electric Mobility, and Adani Green Energy.

Gains have been concentrated in a handful of financials and PSU stocks. Bajaj Finance, ICICI Bank, and select PSU banks, along with some energy names, have lent crucial support to the indices.

“Investors should stay selective, focusing on fundamentally strong stocks in leadership sectors showing technical breakouts and improving momentum, rather than broad-based buying,” said Hardik Matalia, Derivative Analyst at Choice Broking.

On the technical front, the Sensex has reclaimed key moving averages on the daily chart with momentum indicators turning positive. Still, the index remains range-bound between 76,000 and 84,000 on the weekly timeframe, signalling consolidation. Analysts note that the monthly structure continues to stay bullish as the index trades well above long-term averages, pointing to a rotational market phase rather than a structural reversal.