Indian equity markets ended the week on a positive note, snapping an unprecedented eight-week losing streak as easing crude oil prices, encouraging corporate business updates and a sharp recovery in IT stocks improved investor sentiment. However, the broader market remained vulnerable to foreign institutional investor (FII) selling, elevated global bond yields, geopolitical uncertainty and concerns over tighter domestic monetary policy. The RBI's 25-basis-point repo rate hike to 5.50%, alongside its shift towards a calibrated tightening stance, added to concerns about borrowing costs and liquidity conditions. For the week ended, BSE Sensex advanced 562.63 points, or 0.78%, to close at 72,472.33, while the Nifty 50 gained 98.50 points, or 0.44%, to settle at 22,520.45. The recovery was largely driven by Friday's strong rally, led by IT stocks following TCS's quarterly results and a moderation in crude prices. Nevertheless, foreign investors remained net sellers, with weekly outflows of approximately Rs. 30,294 crore, while domestic institutional investors provided substantial support through net purchases of around Rs. 30,313 crore. Although the recovery offers some relief after the prolonged correction, sustained buying participation and improving earnings visibility will be necessary to establish a durable reversal.
Global equity markets ended the week on a positive note despite heightened volatility driven by elevated US Treasury yields, crude oil prices, geopolitical tensions and profit-booking in artificial intelligence-related stocks. In the US, the Dow Jones Industrial Average gained 0.9% for the week, while the S&P 500 advanced 1.2% and the Nasdaq Composite rose 0.6%, supported by a recovery in technology and healthcare stocks. Technology stocks witnessed sharp fluctuations amid concerns over AI-related valuations, substantial capital expenditure and earnings sustainability. Meanwhile, longer-dated US Treasury yields reached 24-year highs, raising concerns over borrowing costs and equity valuations. Crude oil prices remained elevated, with Brent trading above US$102 per barrel and WTI near US$92, reflecting continued uncertainty surrounding the US–Iran conflict. However, reports of potential Russian diesel supplies provided some relief to energy markets. Looking ahead, investors will closely monitor US inflation data, Treasury yields, geopolitical developments and the upcoming corporate earnings season, particularly results from major US banks and healthcare companies.
Key Reasons for Market Movement
US–Iran Conflict
Geopolitical uncertainty involving the US and Iran remained an important risk factor for global financial markets, primarily because of its implications for energy supplies and shipping through the Persian Gulf and the Strait of Hormuz. Any escalation involving oil infrastructure, tanker movements or regional shipping routes could disrupt crude exports and increase insurance and transportation costs. Such developments would be particularly significant for India because higher oil prices can worsen the current-account balance, increase imported inflation and put pressure on the rupee. During the week, markets responded to changing geopolitical signals and fluctuations in crude oil prices. Easing oil prices supported a recovery in Indian equities towards the end of the week, but the broader geopolitical risk premium remained a concern. Investors will continue to monitor diplomatic developments, the security of shipping routes and any signs of disruption to regional energy supplies.
Crude Oil
Crude oil remained a central macroeconomic variable during the week, with Brent prices trading around US$104 per barrel at the end of the period, while WTI remained comparatively lower. Prices were influenced by geopolitical developments, supply-disruption concerns and changing expectations regarding global demand. Although easing prices helped support the late-week recovery in Indian equities, oil remained expensive enough to pose risks to India's inflation and external balances. The near-term outlook will depend on the evolution of US–Iran tensions, the security of shipping routes, production decisions by major oil producers and global demand expectations. Any disruption to supplies could push prices higher, while improved diplomatic conditions or weaker demand could lead to further moderation.
Economy
India's economic outlook remains supported by domestic demand, services activity and investment, although higher energy prices and tighter financial conditions present potential challenges. The RBI reported that real GDP growth reached 7.8% in Q1 FY27, supported by private consumption, fixed investment, a recovery in merchandise exports and continued strength in services exports. Reflecting this resilience, the central bank raised its FY27 GDP growth forecast to 7.1% from 6.7% in its previous assessment. It also revised its Q2 and Q3 growth projections to 7.2% and 6.9%, respectively. These projections indicate that domestic economic activity remains relatively firm despite external uncertainty. High-frequency indicators also offer a mixed but broadly supportive picture. India's HSBC Services PMI increased to 55.2 in September from 54.1 in August, signalling continued expansion in services activity. However, the pace of growth across the quarter and the performance of manufacturing, exports and consumer demand will remain important in determining the sustainability of economic momentum.
US Bond Yield
US Treasury yields remained elevated during the week, reflecting concerns over persistent inflation, fiscal borrowing requirements and uncertainty surrounding the Federal Reserve's policy trajectory. Long-dated yields had risen to multi-decade highs earlier in the week before easing slightly towards Friday. At the end of the week, the US 10-year Treasury yield stood at approximately 5.25%, while the 30-year yield was around 5.61%. The modest decline provided some relief, but borrowing costs remained high by recent standards. The latest US employment data, showing a weaker-than-expected increase in September payrolls, introduced another consideration for policymakers. Slower employment growth could support the case for monetary easing if inflation moderates, but elevated energy prices could limit the Federal Reserve's flexibility. Market will closely monitor US CPI inflation, Treasury auctions and subsequent Fed commentary for clarity on the rate outlook.
Upcoming Week Outlook
The coming week is likely to remain event-driven, with domestic inflation readings, industrial production, global economic data and the Q2 FY27 earnings season determining market direction. Indian equity markets have ended an extended losing streak, an initial improvement rather than confirmation of a sustained uptrend. Technically, Nifty 50's immediate support is around 22,200–22,000, while resistance is placed near 23,000–23,200. A sustained move above the resistance zone could improve sentiment and open the way for a recovery towards higher levels. Conversely, a decisive break below 22,000 could revive selling pressure and expose the index to further downside. The RBI's tighter policy stance, elevated crude oil prices, high US bond yields and continued foreign selling remain important risks. At the same time, resilient domestic growth, institutional buying support and the start of the earnings season provide potential stabilising factors. For the coming week, the focus will remain on CPI and WPI inflation, industrial production, corporate earnings and geopolitical developments. A cautious, selective approach is appropriate, with emphasis on companies that demonstrate earnings resilience, sound balance sheets and sustainable cash flows. A sustained improvement in market breadth, easing external pressures and stronger-than-expected earnings would help establish a more durable recovery.