Indian Markets Face a Critical Week as Oil, Yields, RBI Policy Come into Focus
By Ponmudi R.
Indian equities remained under pressure through the week, with both the Nifty 50 and Sensex extending their declines to eight consecutive weeks, marking their longest weekly losing streak in 25 years. Persistent foreign institutional selling, elevated crude oil prices, a weaker rupee and higher global bond yields continued to weigh on investor sentiment. The broader market also remained under pressure, with selling extending across several sectors as investors maintained a cautious approach amid ongoing geopolitical and global macroeconomic uncertainties.
The macroeconomic backdrop remains challenging. Brent crude moved back above the $100-per-barrel mark amid continuing geopolitical uncertainty and concerns around energy supplies, while the Indian rupee weakened to around ₹96.33 per dollar. At the same time, the U.S. 10-year Treasury yield climbed to around 5.35%, its highest level since 2002, increasing pressure on emerging-market assets and global risk appetite. The combination of elevated crude prices, higher global yields and currency weakness continues to raise concerns over India's import bill, inflation and corporate margins.
Foreign institutional selling remained a major overhang throughout September, with FIIs recording net outflows of approximately ₹44,013 crore during the month. In contrast, domestic institutional investors provided a significant cushion, with DIIs making net purchases of around ₹76,030 crore. FII selling intensified during the final week of September, adding to the pressure on domestic equities and weighing on overall market sentiment.
Weekly Market Outlook
Indian equities enter the coming week after eight consecutive weekly declines, with both the Nifty and Sensex firmly in a prolonged corrective phase. Deeply oversold conditions and continued support from domestic institutional investors could provide the basis for intermittent technical rebounds. However, a sustained improvement in sentiment will depend on greater stability in crude oil prices, global bond yields and the rupee, alongside a moderation in foreign portfolio outflows.
Crude oil remains the most immediate macroeconomic concern. Brent crude trading above $100 a barrel continues to intensify pressure on India’s external balances and inflation outlook, while persistent geopolitical uncertainty threatens to keep the risk premium in energy prices elevated. A meaningful decline in crude could offer some relief to the rupee and oil-sensitive sectors, but renewed supply disruptions would risk extending the pressure on domestic equities.
Developments surrounding Iran’s proposed seven-day framework for reopening the Strait of Hormuz and advancing negotiations with the United States will therefore remain central to the global energy outlook. Tehran has sought the lifting of the U.S. blockade and easing of oil-related restrictions as part of the proposed arrangement. However, differences over the sequencing and terms remain unresolved, with Washington indicating that the proposal is unacceptable in its current form. The outlook for regional energy supplies consequently remains highly sensitive to further diplomatic developments, leaving crude prices vulnerable to renewed volatility.
Global bond yields will be another important determinant of risk appetite. A moderation in U.S. Treasury yields could ease pressure on emerging-market assets and support a more constructive environment for foreign flows. Conversely, a further rise in yields could reinforce the relative appeal of U.S. assets and encourage continued portfolio reallocation away from emerging markets.
The U.S. economic data will also remain in focus, particularly for signals on whether inflation and employment pressures are easing sufficiently to alter expectations for Federal Reserve policy. September’s jobs report pointed toward a moderation in labor-market conditions, with payrolls increasing by just 29,000 against expectations of approximately 90,000. Unemployment edged up to 4.2%, while annual wage growth slowed to its weakest pace since 2021. The softer employment picture could help temper upward pressure on Treasury yields, although the sustainability of that relief will depend on subsequent inflation and labor-market readings.
The rupee will remain another closely watched variable after weakening to around ₹96.33 per dollar, its lowest level in two months. Elevated crude prices, U.S. Treasury yields and persistent FII selling continue to weigh on the currency, while RBI intervention has helped contain excessive volatility. A period of sustained currency stability would provide a more supportive backdrop for domestic equities, particularly by easing concerns over imported inflation and external vulnerabilities.
Against this challenging external backdrop, the outcome of the Reserve Bank of India’s monetary policy meeting next week will be a significant domestic catalyst. Investors will be looking for signals on the RBI’s assessment of inflation risks, currency pressures and the broader growth outlook. With global developments continuing to dominate sentiment, the market’s ability to establish a durable recovery will likely depend on a combination of easing external pressures, stable domestic liquidity and a more constructive trend in foreign investor flows.
Technical Views
Nifty 50
Nifty 50 extended its broader corrective phase, registering its eighth consecutive weekly decline. The index remains below key moving averages and continues to form lower highs and lower lows, keeping the broader technical structure weak. The sharp decline during the week pushed the index to an intraday low near 22,217 before a modest recovery from the lows. On the upside, 22,500–22,600 is likely to act as the immediate resistance zone, followed by 22,800–23,000. A sustained move above 22,600 could provide some near-term stability and support a recovery toward 22,800–23,000. However, the index would need to reclaim the 23,000 region to meaningfully improve the broader short-term structure.
On the downside, 22,200 remains the immediate support level, followed by the psychological 22,000 mark. A decisive break below 22,200 could intensify selling pressure and expose the index to 22,000 and potentially lower support levels. Technical momentum remains weak, with the RSI in oversold territory and the MACD continuing to signal negative momentum. The deeply oversold conditions, however, leave room for intermittent technical rebounds.
Bank Nifty
Bank Nifty also remained under pressure during the week and continues to maintain a weak broader structure. On the upside, 55,000–55,300 is likely to act as the immediate resistance zone, followed by 55,500–56,000. A sustained move above 55,300 could provide some relief and support a recovery toward 55,500–56,000. A decisive breakout above 56,000 would be required to strengthen the recovery structure.
On the downside, 54,000 remains the immediate and crucial support zone, followed by 53,800. A decisive break below 54,000 could intensify selling pressure and expose the index to lower support levels. The Bank Nifty remains in a cautious-to-bearish technical structure. While oversold conditions could trigger short-term recovery attempts, sustained buying above 55,300 and subsequently 56,000 would be required to establish a more meaningful recovery.
Sensex
Sensex extended its decline for the eighth consecutive week, marking its lowest closing level since February 2024. On the upside, 72,300–72,500 is likely to act as the immediate resistance zone, followed by 72,700–73,000. A sustained move above 73,000 could provide some technical relief and improve the short-term structure.
On the downside, 71,500–71,300 remains an important support zone, followed by the 71,000 mark. A decisive break below 71,000 could extend the broader corrective phase. The RSI has moved into deeply oversold territory, indicating persistent downside momentum but also leaving room for a technical rebound if buying interest emerges.
(The writer is the CEO, Enrich Money)
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