Indian markets under pressure: Oil, outflows and a weaker rupee deepen the downturn

Nifty, Sensex under pressure in opening trade on Friday as weak global cues, foreign fund outflows and a sinking rupee kept investors cautious.

The week began with a sharp fall on September 28. The Nifty declined by around 1.6 percent, while the Sensex fell by approximately 1.5 percent. 

The main pressure came from rising crude oil prices, geopolitical concerns and continued selling by foreign investors. Higher oil prices raised concerns about India's import bill, inflation and corporate profitability.

On September 29, the market remained weak, although the pace of decline moderated. The Nifty fell about 0.3 percent and the Sensex declined by a similar amount. Investors continued to monitor rising US bond yields and crude oil prices, while foreign institutional investors remained significant sellers of Indian equities.

The market remained under pressure on September 30, the final trading day of the month. The Sensex declined marginally, while the Nifty fell by about 0.4 percent. September ended as a particularly difficult month for Indian equities, with the Nifty losing roughly 6 percent during the month. Foreign portfolio investors were also major net sellers during September, contributing to the weakness in the market.

The selling intensified again on October 1. The Nifty declined by about 0.9 percent to close at 22,421.95, while the Sensex fell by about 0.8 percent to 71,909.70. The rupee weakened to around Rs 96.3 against the US dollar, while crude oil prices moved back above the USD 100 per barrel level. Rising US Treasury yields added to pressure on emerging-market assets and contributed to continued foreign fund outflows.

Indian equities remained under pressure through the week, with both the Nifty 50 and Sensex extending their declines to eight consecutive weeks, marking their longest weekly losing streak in 25 years.

Persistent foreign institutional selling, elevated crude oil prices, a weaker rupee and higher global bond yields continued to weigh on investor sentiment. The broader market also remained under pressure, with selling extending across several sectors as inves

tors maintained a cautious approach amid ongoing geopolitical and global macroeconomic uncertainties.  

 

The macroeconomic backdrop remains challenging. Brent crude moved back above the $100-per-barrel mark amid continuing geopolitical uncertainty and concerns around energy supplies, while the Indian rupee weakened to around ₹96.33 per dollar.

 At the same time, the U.S. 10-year Treasury yield climbed to around 5.35%, its highest level since 2002, increasing pressure on emerging-market assets and global risk appetite. The combination of elevated crude prices, higher global yields and currency weakness continues to raise concerns over India's import bill, inflation and corporate margins.  

 

Foreign institutional selling remained a major overhang throughout September, with FIIs recording net outflows of approximately ₹44,013 crore during the month. In contrast, domestic institutional investors provided a significant cushion, with DIIs making net purchases of around ₹76,030 crore. FII selling intensified during the final week of September, adding to the pressure on domestic equities and weighing on overall market sentiment.

"Indian equities remained under pressure through the week, with both the Nifty 50 and Sensex extending their declines to eight consecutive weeks, marking their longest weekly losing streak in 25 years," said R Ponmudi, CEO at Enrich Money, an online trading and wealth tech company.

According to him, persistent foreign institutional selling, elevated crude oil prices, a weaker rupee and higher global bond yields continued to weigh on investor sentiment. The broader market also remained under pressure, with selling extending across several sectors as investors maintained a cautious approach amid ongoing geopolitical and global macroeconomic uncertainties, he added.

Foreign institutional selling was one of the most important features of the period. Foreign investors continued to withdraw funds from Indian equities, while domestic institutional investors continued to provide support through purchases. Domestic buying helped cushion the market, but it was not sufficient to completely offset the pressure created by foreign selling.

The weakness was broad-based and extended beyond the major indices. Mid-cap and small-cap stocks also recorded declines during the week. Financial stocks, metals, consumer-oriented companies and automobile stocks faced selling pressure at various points. 

The information technology sector showed comparatively better performance toward the end of the period, helped partly by expectations that a weaker rupee could benefit companies with significant overseas revenues.

The movement of the rupee, crude oil prices and US bond yields remained closely connected to the performance of Indian equities. Higher crude prices create pressure on India's import bill and can affect inflation and the country's external balance. 

At the same time, higher US Treasury yields can encourage global investors to allocate more funds toward dollar-denominated assets, reducing the relative attractiveness of emerging-market equities. The combination of these factors contributed to continued foreign selling and pressure on the rupee.

Overall, the Indian market experienced a distinctly negative trend during the week. The decline was not driven by one particular domestic event but by a combination of global and domestic factors, including elevated crude oil prices, geopolitical uncertainty, high US bond yields, currency weakness and sustained foreign portfolio outflows. 

Domestic institutional investors provided an important source of support, while selected sectors, particularly information technology, showed greater resilience.

Going into the following week, investors are likely to remain focused on crude oil prices, the movement of the rupee against the US dollar, US Treasury yields, foreign and domestic institutional flows and developments in corporate earnings. The ability of domestic investors to absorb continued foreign selling will also remain an important factor for market sentiment.