Positive cues from Wall Street, Fed, RBI likely to help Indian Markets to Recover

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by Hariselvan Radhakrishnan

Indian equities ended lower for the eighth consecutive week — the longest such sequence in 25 years — as foreign selling, rupee weakness, elevated crude and rising global bond yields weighed on sentiment. The Nifty declined 3.11% during the holiday-shortened week to 22,421.95, while the Sensex fell 2.69% to 71,909.70. Bank Nifty showed relative resilience, closing at 54,450.75.

Overnight global cues improved after US payroll growth slowed sharply to 29,000 in September, against expectations of around 90,000, while unemployment increased to 4.2% and annual wage growth eased to 3%. The report reduced the probability of another Federal Reserve rate increase in October to below 25%, helping the S&P 500, Dow and Nasdaq close higher.

However, the US 10-year Treasury yield closed 5.28% as crude rebounded. Brent settled around $102.25 after fluctuating between $98 and $103, showing that neither the oil nor bond-market pressure has eased sustainably. Sunday’s meeting of the seven OPEC+ members managing voluntary production adjustments will be important; continued supply restraint and unresolved US–Iran tensions could keep Brent above $100, while higher supply or improved Middle Eastern exports may provide greater relief.

The RBI’s policy decision will be the principal domestic trigger. While market expectations are broadly tilted towards a 25-basis-point rate hike, such a move, if delivered, could initially weigh on consumption and rate-sensitive sectors. However, a credible response to inflation may lend support to the rupee and domestic bond markets.

Conversely, a policy hold accompanied by balanced guidance and adequate liquidity could trigger a broader relief rally following eight consecutive weeks of declines. The US FOMC minutes will subsequently offer insights into the extent of support among U.S. policymakers for further monetary tightening beyond the September rate increase.

Foreign investors recorded net sales of ₹9,484 crore on Thursday, while domestic institutions bought ₹10,042 crore, helping cushion the impact on benchmark indices. However, sustained foreign outflows could continue to constrain a durable recovery unless crude oil prices, global bond yields and the rupee stabilise in tandem.

Technically, the Nifty has closed below its weekly 200-SMA zone of 22,600–22,580, leaving 22,400 as the immediate support. A decisive breakdown could extend weakness toward 22,200–22,000, while reclaiming 22,600 and then 22,800 would strengthen the possibility of a mean-reversion recovery. Bank Nifty remains below its weekly 100-SMA near 55,175, with support around 54,000. Monthly Nifty RSI remains below 50, while India VIX at 14.38 and a PCR of 0.69 indicate defensive positioning.

Positive cues from Wall Street and diminishing expectations of an immediate Fed rate hike could lend support to Indian equities at Monday’s opening. A balanced RBI policy outcome, a sustained move in Brent crude below $100 a barrel and the Nifty’s ability to reclaim 22,600 could help extend the recovery. However, renewed escalation in oil prices, U.S. Treasury yields remaining above 5.25% or a decisive break below 22,400 would reinforce the prevailing sell-on-rise bias.

(The writer is the founder and CEO of HST Wealth, a SEBI-registered Research Analyst firm)