Indian equity benchmark indices, the Nifty and Sensex, have logged their eighth straight weekly loss, marking their longest losing streak in a quarter-century. This significant downturn comes amid sustained selling by foreign institutional investors (FIIs), crude oil prices soaring above $100 a barrel, and elevated US bond yields.
Key Factors Driving the Sell-Off
The market sentiment has been significantly dampened by several interconnected global and domestic factors. Persistent foreign institutional investor (FII) selling has been a primary force, with FPIs turning net sellers of domestic stocks to the tune of Rs 9,484.22 crore on Thursday alone, and approximately Rs 35,000 crore over the last week.
Brent crude oil prices hovering above the $100-a-barrel mark continue to fuel inflationary concerns globally. Concurrently, the yield on the US 10-year Treasury note has surged to its highest level since mid-June 2007. This makes emerging market assets, including Indian equities, less attractive to overseas investors seeking higher and safer returns.
Expert Insights and Outlook
Ajit Mishra, SVP of Research at Religare Broking, highlighted that "persistent foreign selling and elevated US Treasury yields continued to weigh on market sentiment, keeping the broader tone risk-averse." He also noted that the renewed rise in crude oil prices, coupled with a weakening Indian rupee, intensified the pressure on the market.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, anticipates that Indian equities will remain under pressure in the near term. He attributed this to a record global bond rout, continued strength in crude, and the heaviest foreign selling in six months. Khemka suggested that a sustained recovery is unlikely until global yields stabilize, crude prices ease, and foreign outflows moderate.
RBI Action and Domestic Impact
Adding to the market's concerns, the Reserve Bank of India (RBI) is widely expected to raise interest rates by 25 basis points to 5.50 percent on October 7, according to a Reuters poll. If implemented, this would be the first rate hike since 2023. Domestically, the Indian rupee has hit a two-month low, and the benchmark 10-year bond yield has climbed to its highest level in over two years, reflecting underlying economic stresses.
FIIs vs. DIIs: The Battle for Liquidity
While foreign investors have been aggressively pulling out funds, domestic institutional investors (DIIs) have stepped in as net buyers, absorbing Rs 10,041.84 crore on a net-net basis on Thursday. Vinod Nair, Head of Research at Geojit Investments, explained that while "steady DII buying absorbed much of the outflow, cushioning but not arresting the decline," broader markets still fell. He also pointed out that heavy IPO issuance has drawn liquidity away from listed equities, further impacting market dynamics.
Technical Levels to Watch
Technically, the market has consistently faced selling pressure, forming a long bearish candle on weekly charts and making lower highs and lower lows intraday, indicating a largely negative trend. However, experts like Amol Athawale, VP of Technical Research at Kotak Securities, believe the market's short-term texture is weak but oversold, suggesting the possibility of a pullback rally.
- Nifty50: Key support is at 22,200, with immediate resistance at 22,500. A break below 22,200 could trigger further selling towards 22,000.
- Sensex: Support is around 71,300, and resistance at 72,200. A move below 71,300 could push the index towards 71,000.
- RSI: The Relative Strength Index (RSI) for both Nifty and Sensex has slipped into deeply oversold zones, at 23 and 24.55 respectively, indicating potential for a technical bounce.
- India VIX: The volatility index surged 7.12 percent to 14.45, reflecting increased nervousness among investors.
The Nifty Bank also showed indecision, forming a high-wave candle. Its near-term trend remains cautious, with support at 54,000-54,100 and resistance at 55,100-55,200, according to Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.