Indian equity markets remained under pressure during the week as elevated crude oil prices, geopolitical tensions and uncertainty around the US Federal Reserve's interest-rate trajectory weighed on investor sentiment. The benchmark indices declined through most sessions, although Friday witnessed a modest recovery. Last week, BSE Sensex declined 749.08 points, or 0.97%, to close at 76,515.43, while the Nifty 50 fell 277.95 points, or 1.15%, to settle at 23,897.70. The broader market also weakened, with the BSE 150 Mid-Cap Index declining 1.36% to 17,098.91, while the BSE 250 Small-Cap Index fell 0.21% to 7,264.06. The market's weakness came despite a strong domestic growth print, with India's real GDP expanding 7.8% YoY in Q1FY27, significantly above the RBI's 7% estimate. Manufacturing activity, however, moderated, with the HSBC Manufacturing PMI declining to 52.8 in August, its weakest reading in five years. Services activity remained stronger, with the Services PMI improving to 54.1. Corporate fundamentals also remained healthy, while the special USD-INR swap facility generated substantial foreign-currency inflows. Nevertheless, investors remained cautious as higher crude prices raised concerns over inflation, the rupee and corporate margins. The market is now likely to be driven increasingly by global monetary policy, crude oil movements, FII flows and upcoming inflation data rather than the concluded earnings season. Technically, Nifty 50 has immediate support around 23,600, while a decisive break below 23,600 could open the downside towards 23,300-23,000. On the upside, 24,200–24,500 remains the key resistance zone.
Global markets remained volatile and cautious during the week as investors balanced resilient US economic data against elevated crude oil prices, rising bond yields and renewed geopolitical tensions. US equities ended the week mixed, with the Dow Jones declining 0.3%, while the S&P 500 gained 0.1% and Nasdaq advanced 0.4%. However, markets came under pressure on Friday after stronger-than-expected US employment data increased expectations of a September Federal Reserve rate hike. The US economy added 162,000 jobs in August, significantly above expectations, while unemployment remained at 4.1%. The stronger labour market pushed the US 2-year Treasury yield towards 4.37% and the 10-year yield near 4.78%, keeping pressure on equity valuations. European markets remained under pressure from higher energy prices and expectations of further monetary tightening, while Japanese bond yields crossed 3%, raising concerns about global capital flows and yen appreciation.
The US–Iran conflict remains a significant source of uncertainty for global markets, particularly because of its impact on crude oil supplies and shipping through the Strait of Hormuz. The latest escalation has increased concerns about the duration of the disruption and the possibility of further attacks affecting regional energy infrastructure. Although some crude flows have continued through the Strait, shipping activity remains below normal levels, keeping a geopolitical premium embedded in oil prices. The conflict also raises the risk of broader inflationary pressure as higher energy and diesel prices affect transportation, agriculture and manufacturing costs. For India, prolonged tensions could increase the import bill, pressure the rupee and constrain the scope for monetary easing. Any meaningful diplomatic breakthrough or sustained improvement in shipping flows, however, could result in a sharp decline in crude prices and provide relief to Indian equities.
Crude oil prices remained elevated as renewed US–Iran military tensions increased concerns over supply disruptions. Brent crude closed at US$96.28 per barrel, while WTI crude settled at US$91.48 per barrel, with Brent gaining nearly 8% and WTI almost 10% during the week. The sharp increase in oil prices is particularly important for India because the country is heavily dependent on imported crude. Sustained crude prices near US$95–100 could increase the import bill, put pressure on the rupee, raise inflation and negatively affect margins of oil-consuming industries. The rise in diesel prices is another concern because diesel directly affects freight, agriculture and industrial transportation costs. Market participants will therefore closely monitor crude flows through Hormuz and developments in US–Iran negotiations. A sustained easing in oil prices would be positive for Indian equities, while another sharp increase could intensify macroeconomic concerns.
India's economy delivered a strong growth performance despite challenging global conditions. Real GDP grew 7.8% YoY in Q1FY27, comfortably ahead of the RBI's 7% forecast, while real GVA expanded 8.2%. Manufacturing and financial services were among the key contributors, although growth moderated from the revised 8.6% recorded in Q4FY26. The latest corporate-sector data also indicate healthy underlying demand, with listed private non-financial companies reporting strong sales and operating profit growth during Q1FY27. At the same time, economic activity showed some signs of moderation. The HSBC Manufacturing PMI declined to 52.8 in August, its weakest reading in five years, as growth in output and new orders slowed. Services remained relatively stronger, with the Services PMI improving to 54.1 and the Composite PMI remaining at 54.3. India's external position received support from substantial foreign-currency inflows through the special USD-INR swap facility, which stood at US$136.38 billion as of 31 August. The upgrade of India's sovereign rating by Japan Credit Rating Agency to A- from BBB+ further reflects improving confidence in India's growth, policy framework and financial-sector resilience. Overall, the economy remains fundamentally strong, but higher crude prices and global monetary tightening remain important risks.
US Treasury yields moved higher towards the end of the week following stronger-than-expected August employment data. The 10-year US Treasury yield rose to around 4.784%, while the 2-year yield increased to approximately 4.377%, its highest level since January 2025. The 30-year Treasury yield remained around 5.245%. The US economy added 162,000 jobs in August, substantially above the market expectation of 53,000, while the unemployment rate remained at 4.1%. The stronger labour-market report increased expectations of a Federal Reserve rate hike at the September 15–16 meeting, with futures markets pricing approximately a 58% probability of a 25-basis-point hike. Higher Treasury yields and a stronger dollar could put further pressure on emerging-market equities and foreign portfolio flows. The next major focus will be US inflation data, which could determine whether the Fed ultimately tightens policy this month.
The coming week is expected to remain highly event-driven, with US inflation data emerging as the most important global macro trigger ahead of the Federal Reserve's September 15–16 policy meeting. The market will closely watch whether inflation shows further moderation or remains sticky, as this will influence expectations for a rate hike and direction of US Treasury yields. In China, investors will monitor August trade data, CPI and PPI inflation, while US investors will track Producer Price Inflation, existing home sales and consumer sentiment. For India, the focus will remain on foreign exchange reserves, crude oil prices, FII flows and developments around the US–Iran conflict. The Nifty's ability to sustain above the 23,800-support zone will remain important for near-term sentiment; a decisive breakdown below 23600 could increase downside pressure, while a recovery above 24,200 would improve the short-term setup. Overall, domestic growth remains a key positive, but elevated crude prices and higher US rate expectations are likely to keep volatility elevated. Investors should remain selective and favour companies with strong earnings visibility, healthy balance sheets and limited sensitivity to crude and currency movements.