The Earnings Paradox: Why Strong Q2 Results Couldn't Stop Today's Market Selloff

When Earnings Boom Meets Selling Spree: The Curious Case of November 4, 2025

Tuesday, November 4, proved to be one of those fascinating—and frustrating—days in the Indian stock market where everything seems contradictory. While some of India’s biggest companies unveiled genuinely impressive Q2 results, the overall market still closed firmly in the red. Welcome to the earnings paradox.

The Sensex dropped 519 points (0.62%) to close at 83,459, while the Nifty fell 166 points (0.64%) to end at 25,598. On the surface, this looks like a straightforward selloff. But dig deeper, and you’ll find a market torn between two powerful forces: strong corporate earnings pulling upward and foreign investor selling pulling downward. The sellers won today.

The Winners: Corporate India Delivers Strong Numbers

Before we talk about the decline, let’s give credit where it’s due. Several blue-chip companies knocked it out of the park with their Q2 results:

Titan Company was the superstar of the day, with profit surging 59% year-on-year to ₹1,120 crore. The jewellery segment alone grew 21%, riding strong festive demand—particularly during Navratri. Tanishq’s gold exchange offer proved popular despite elevated gold prices, while the high-fashion CaratLane brand delivered a blistering 32% growth. The stock climbed nearly 2.39%, becoming the day’s biggest outperformer among Nifty 50 stocks.

State Bank of India (SBI), India’s largest bank, reported net profit rising 10% to ₹20,160 crore. Net interest income—the lifeblood of any bank—climbed 3.3% to ₹42,985 crore. What’s particularly impressive is that asset quality improved significantly, with gross NPAs falling to 1.73%. The bank also crossed the monumental ₹100 trillion business milestone during the quarter. SBI stock actually held steady, closing with a modest 0.72% gain.

Mahindra & Mahindra (M&M) posted consolidated profit jumping 28% to ₹3,673 crore, driven by stellar performance from its auto and farm divisions. The auto division captured a commanding 25.7% share of the SUV market—up 390 basis points year-on-year. Farm equipment also shined, with tractor volumes climbing 32% and market share reaching 43%. This wasn’t just profit growth; it was market dominance growth. M&M stock finished 0.93% higher.

These aren’t small moves. This is the kind of earnings momentum that would typically lift the entire market. Yet it didn’t. Why?

The Culprits: FII Selling and Global Uncertainty

The real story of November 4 wasn’t about individual earnings—it was about foreign money fleeing Indian markets. Foreign Institutional Investors (FIIs) sold ₹1,883 crore on Monday alone, marking the fourth consecutive day of net outflows. Since October 29, FIIs have pulled out a staggering ₹14,269 crore from Indian equities.

Why are FIIs running? Several reasons are converging:

1. Rising US Bond Yields and Dollar Strength – With US Treasury yields climbing and the Federal Reserve maintaining a firm stance on interest rates, global capital is finding safer, higher-yielding homes in dollar-denominated assets. The dollar index hit a three-month peak, making emerging markets like India less attractive by comparison.

2. Valuation Concerns – Analysts frequently cite that India’s valuations remain stretched compared to global peers, even as near-term earnings growth remains muted. FIIs are essentially saying: “We’ll wait for a better entry point.”

3. Rupee Weakness – The Indian rupee plumbed near record lows against the US dollar, weakening to around 88.66 per dollar (down from 88.78 the previous day). For a foreign investor, a weak rupee means their rupee-denominated returns suffer when converted back to dollars. This creates a double headwind: rising dollar values + falling rupee = reduced returns for overseas investors.

4. Weak Global Cues – Asian markets struggled Tuesday morning, with South Korea’s Kospi down and Japan’s Nikkei under pressure. European markets shed 1-2% overnight. When global sentiment turns sour, India—despite its strong fundamentals—doesn’t escape the downward spiral.

The Sector Story: IT, Metals, and Autos Take the Hit

The profit-booking wasn’t random. It was surgical and sector-specific. Here’s how the major indices fared:

• Nifty IT: Down 1.02% – IT stocks have been underperforming lately due to muted Q2 earnings and concerns about US economic data.
• Nifty Metal: Down 1.28% – Metals sold off on weak Chinese industrial activity and slowing global demand.
• Nifty Auto: Down 0.73% – Despite M&M’s strong results, the broader auto sector faced profit-taking.
• Nifty Realty: Down 0.40% – Real estate stocks couldn’t escape the broader weakness.

The only sectors with green closes were Consumer Durables (up 0.48%) and Telecom (up slightly). This is classic “risk-off” behaviour—money flowing toward defensive, non-cyclical sectors.

The breadth was particularly weak: only 1,543 stocks advanced against 2,439 decliners. Out of the Nifty 50, a staggering 40 stocks closed in red. This wasn’t a selective correction; this was broad-based selling.

The IPO Bright Spot: Lenskart’s Record-Breaking Run

While the broader market stumbled, one story absolutely dominated: Lenskart Solutions’ IPO. The eyewear retailer’s ₹7,278 crore public offering was subscribed 16.34 times by the 3 PM mark on its final day (November 4). Let that number sink in.

Breaking it down:

• QIB (Qualified Institutions): 19.83x subscription
• Non-Institutional Investors: 16.05x subscription
• Retail Individual Investors: 6.55x subscription

This is the kind of IPO fervour we haven’t seen in a while. Lenskart, which operates 2,723 stores globally and recorded ₹6,652 crore in FY25 revenue (up 22.6% YoY), is priced at ₹382-₹402 per share. At the upper band, it values the company at around ₹69,700 crore. The strong subscription suggests retail investors—despite market weakness—believe in Lenskart’s growth story. The stock is expected to list on November 10.

The market lesson here: Even as institutional money is pulling out, retail investor optimism remains intact. This could actually provide a floor under the market if retail continues to deploy capital selectively into quality stories.

What’s Next? Technical Levels and the Holiday Effect

With Guru Nanak Jayanti closing the markets on Wednesday, November 5, this two-day sell-off came in a shortened week. That’s relevant because reduced liquidity often amplifies moves—both up and down.

Technically, the Nifty found initial support near the 20-day exponential moving average (EMA) but closed below it. Key support levels to watch:

• 25,500-25,400 – A crucial zone where buyers may re-enter
• 25,800 – Immediate resistance; a close above here signals potential recovery

Analysts are cautiously optimistic about the longer-term trend but note that medium-term headwinds persist. The next 2-3 weeks will be critical. If FII selling continues post-holiday, the Nifty could test lower supports. Conversely, if domestic flows (DIIs have bought ₹3,273 crore so far this month) remain strong and FII selling pauses, a bounce is possible.

The Bigger Picture

November 4 encapsulates the paradox facing Indian markets right now:

The fundamentals remain strong. Earnings are beating expectations, the manufacturing PMI surged to 59.2 in October (strong growth signal), and domestic institutions are continuing to buy.

Yet sentiment is fragile. Global headwinds, FII outflows, rupee weakness, and stretched valuations are creating temporary disconnects between earnings quality and stock performance.

For retail investors, this is both a warning and an opportunity. The warning: don’t assume earnings automatically mean rallies. The opportunity: quality companies delivering strong results are now cheaper than they were a week ago.

What to Watch Next

• FII flows post-holiday (November 6 onwards) – Will overseas investors return to buying, or continue selling?
• RBI’s intervention – Will the central bank continue supporting the rupee? Rupee stability could attract FII inflows.
• US economic data – Any shift in Fed expectations could ease pressure on the dollar and emerging markets.
• Q2 earnings season conclusion – More results are due November 5, and strong numbers could rebuild confidence.
• Lenskart listing (November 10) – The IPO’s performance will signal retail appetite for new stories.
• Technical support hold – Watch if Nifty holds above 25,500. A break below would signal deeper correction.

This article is only for information purposes and is not investment advice. Before investing, do your own research.