Indian equity markets ended lower during the week amid sharp intra-week volatility, as elevated US Treasury yields, persistent inflation concerns and uncertainty around global energy prices weighed on investor sentiment. The market remained sensitive to movements in crude oil and developments surrounding US–Iran diplomacy. During the week, Sensex declined 0.54%, to 73,895.74, while the Nifty 50 fell 0.88%, to 23,140.50. Broader markets underperformed, with the BSE 150 Mid-Cap index declining 1.69% and the BSE 250 Small-Cap index falling 0.79%. The week started positively, with the Sensex gaining 0.76% and Nifty rising 0.29% on Monday. However, Thursday witnessed sharp selling, with the Sensex declining 1.67% and Nifty falling 1.64% amid renewed concerns over US Treasury yields and global interest rates. Friday saw a partial recovery as crude oil prices eased and hopes of diplomatic progress between the US and Iran improved sentiment. On the domestic front, S&P Global Ratings raised India's FY27 GDP growth forecast to 7% from 6.6%, supported by industrial activity, consumption, exports and government investment. Overall, the near-term market remains cautious, with crude oil, US bond yields, global inflation and foreign flows likely to determine market direction.
Global markets remained volatile but ended the week with a relatively positive bias as easing crude prices and optimism around US–Iran diplomacy offset concerns arising from sharply higher Treasury yields. US equities recovered towards the end of the week, supported particularly by technology stocks. The Dow Jones gained 0.3% for the week, while the S&P 500 advanced 1.2% and the Nasdaq rose 2%. Technology stocks outperformed, with the information technology sector gaining 3.1%, supported by continued optimism around artificial intelligence-related growth opportunities. However, the bond market remained a key source of concern. The US 10-year Treasury yield moved above 5.2% during the week, reaching its highest level since 2007, while the 30-year yield touched 5.501%, its highest level since 2004. Strong US economic activity and persistent price pressures contributed to the rise in yields. The US Composite PMI increased to 58.4 in September from 56.0 in August, indicating the fastest expansion in private-sector activity in more than five years. Strong economic activity could reduce expectations of rapid monetary easing. Asian markets remained mixed. Japan's Nikkei gained 1.3% on Friday, supported by easing oil prices and stabilising bond yields, while Chinese markets remained focused on trade developments and domestic growth. Overall, global markets remain supported by corporate growth and technology themes but face a significant headwind from elevated bond yields and inflation risks.
The US–Iran conflict remained an important driver of global energy and financial markets, although signs of diplomatic engagement during the week provided some relief. Iran proposed a framework under which the Strait of Hormuz could be reopened within seven days, subject to conditions linked to the June memorandum of understanding. US and Iranian representatives also explored a phased pathway towards de-escalation during discussions around the United Nations General Assembly. The possibility of reopening Hormuz triggered a decline in crude prices towards the end of the week. However, the proposal remains uncertain, as the earlier June understanding failed to prevent renewed hostilities.
At the same time, attacks by Iran-aligned Houthi forces on Saudi infrastructure remain a risk to regional energy supplies. Saudi, Turkish and Pakistani military officials are also discussing potential support for Saudi Arabia. For global markets, a credible diplomatic agreement could reduce the geopolitical premium in crude and support risk assets. Conversely, renewed attacks or a breakdown in negotiations could quickly push oil prices higher. For India, the key transmission channels remain crude oil, inflation, the rupee, current account dynamics and corporate input costs. Therefore, developments around Hormuz will remain important for domestic market sentiment in the coming week.
Crude oil prices corrected sharply towards the end of the week as optimism around possible diplomatic progress between the US and Iran reduced concerns over prolonged supply disruptions. WTI crude settled at $92.41 per barrel, while Brent crude closed at $104.32 on Friday. WTI declined around 7.9% for the week, while Brent remained broadly flat. The decline followed reports that Iran could reopen the Strait of Hormuz if certain conditions are met under the proposed peace framework. The oil market remains highly sensitive to geopolitical developments. Any credible reopening of Hormuz could result in further moderation in crude prices as the geopolitical risk premium unwinds. However, continued attacks on Saudi energy infrastructure and uncertainty around regional supply routes could limit the downside. The key issue for investors is whether diplomatic progress translates into a sustained normalisation of oil flows. If supply conditions improve, crude could gradually move lower and provide relief to oil-importing economies.
India's economic outlook remains relatively resilient despite global macroeconomic pressures. S&P Global Ratings raised its FY27 real GDP growth forecast to 7% from 6.6%, citing stronger-than-expected industrial activity, healthy consumption, robust goods exports and higher government investment. The revision follows India's 7.8% GDP growth in the June 2026 quarter. S&P expects growth to moderate during the second half of FY27 as the impact of GST rationalisation and income-tax reductions gradually fades. It forecasts GDP growth of 7.2% in FY28 and 7% in FY29, indicating continued expectations of relatively strong medium-term expansion. On the inflation front, the government reduced basic customs duties on crude and refined edible oils, including palm, soybean and sunflower oils. The measure is expected to lower import costs and potentially provide some relief to domestic food inflation. The duty reductions became effective from September 24. The government also continued its borrowing programme, with a Rs.34,000 crore issue of 6.94% GS 2036 announced during the week. Bond-market conditions remain important given the sharp rise in global yields. Domestic activity indicators will remain important in the coming week. India's infrastructure output, manufacturing PMI and foreign-exchange reserves are scheduled for release. The flash manufacturing PMI for September had already indicated a significant improvement to 55.7 from 52.8 in August, suggesting a recovery in manufacturing momentum.
US Treasury yields emerged as one of the biggest sources of pressure for global markets during the week. The 10-year Treasury yield climbed to around 5.22%, reaching its highest level since 2007, while the 30-year yield touched 5.501%, its highest level since June 2004. The increase was driven by stronger-than-expected US economic data, persistent inflation concerns and weak demand at a $70 billion five-year Treasury auction. The September S&P Global Flash Composite PMI increased to 58.4 from 56.0, signalling the fastest expansion in private-sector activity in more than five years. Higher energy prices linked to the Middle East conflict have also increased concerns that inflation could remain elevated for longer. Fed officials' hawkish comments have added to expectations that interest rates may remain restrictive. Higher Treasury yields create pressure on global equity valuations because they increase the discount rate applied to future earnings and improve the relative attractiveness of fixed-income assets. For India, sustained US yields above 5% could weigh on FII flows, the rupee and equity valuations, particularly in high-duration sectors.
The Indian market is likely to remain volatile with a cautious bias, with global bond yields, crude oil prices and US–Iran developments continuing to influence investor sentiment. Domestic economic data will also come into focus as the market assesses the strength of India's growth momentum. From a technical perspective, the Nifty has support around 22,800-23,000, while the key resistance zone remains at 23,700-24,000. Immediate focus will remain on whether it can sustain the 23,000 zone. A sustained move above 23,700–24,000 could improve sentiment, while a decisive break below 23,000 could increase downside pressure. Investors should therefore closely track geopolitical developments, crude oil, bond yields and upcoming PMI data. In the US, investors will focus on JOLTs job openings, final Q2 GDP, core PCE inflation, ISM manufacturing PMI and September non-farm payrolls and unemployment data. India's improving growth outlook and stronger manufacturing activity provide fundamental support, while easing crude prices could offer some relief. However, US Treasury yields above 5%, persistent inflation and geopolitical uncertainty remain key risks.