West Asia tensions, rising crude oil prices and US inflation data are likely to influence market sentiment, while strong buying by domestic institutional investors may provide some support
New Delhi : The Indian stock market is heading into an important week, with investors likely to closely track developments in West Asia, crude oil prices and upcoming US inflation data. Global market trends, foreign institutional flows, US Treasury yields and movements in the Indian rupee will also remain key factors in determining the direction of domestic equities.
The market remained under pressure last week. The 30-share BSE Sensex declined by 749.08 points, or 0.96 per cent, while the NSE Nifty fell 277.95 points, or 1.14 per cent.
The decline marked the fourth consecutive weekly fall in the Nifty, making it the longest losing streak for the benchmark in the past five months.
West Asia tensions and rising crude prices remain major concerns
Geopolitical tensions involving the United States and Iran, along with concerns surrounding the Strait of Hormuz, have increased uncertainty in global energy markets.
Brent crude prices rose by more than 8 per cent last week, while WTI crude gained over 9 per cent. Brent crude was trading around the $95-per-barrel level.
For India, higher crude prices are a major concern because the country meets a substantial portion of its energy requirements through imports. A sustained rise in crude prices can increase inflationary pressures and put pressure on the current account.
Higher input and transportation costs could also affect corporate margins and profitability across several sectors.
Ajit Mishra, Senior Vice President and Research Head at Religare Broking, said markets could remain sensitive to global monetary policy, crude oil prices and geopolitical developments during the week.
According to Mishra, after stronger-than-expected US employment data, investors will closely watch changing expectations regarding the US Federal Reserve’s September policy decision.
US-Iran tensions could keep global markets under pressure
Srikant Chouhan, Head of Equity Research at Kotak Securities, said the escalation in US-Iran tensions has increased selling pressure across global equity markets.
The sharp rise in Brent crude prices has also increased concerns surrounding India’s fiscal position and inflation outlook.
However, Chouhan noted that the Indian economy continues to show resilience. India’s real GDP growth for Q1 FY27 stood at 7.8 per cent, exceeding market expectations.
Strong growth in exports and investment has provided additional support to the economy, although sustained geopolitical tensions and higher energy prices remain key risks for investors.
Higher US Treasury yields add to market pressure
Dr Ravi Singh, Research Head at Master Capital Services Ltd, said the Indian market has now closed lower for four consecutive weeks.
He pointed out that Brent crude remains around $95 per barrel and that concerns over supply have made expensive oil one of the biggest risks for the market.
Another factor investors are watching closely is the rise in US Treasury yields. The 10-year US Treasury yield has reached its highest level since 2023, increasing pressure on global equities and contributing to selling by foreign investors.
Higher US yields generally make dollar-denominated assets more attractive and can reduce the appeal of emerging-market equities such as India.
US inflation data to provide the next major market signal
One of the biggest events for global markets next week will be the release of US inflation data.
The latest US employment numbers were stronger than expected. The non-farm sector added 162,000 jobs, significantly higher than market expectations of around 53,000. The unemployment rate remained steady at 4.1 per cent.
The stronger labour-market data has altered expectations surrounding the Federal Reserve’s monetary policy.
Investors will therefore closely examine the upcoming inflation figures to assess whether price pressures are easing enough to influence the Fed’s approach towards interest rates.
US Treasury yields, expectations around future interest-rate cuts and the overall direction of the dollar will also remain important for global markets.
FII selling continues, but DIIs provide strong support
Foreign institutional investors continued to sell Indian equities last week, marking their third consecutive week of net selling.
Foreign investors sold shares worth around ₹5,612 crore during the week.
Domestic institutional investors, however, provided substantial support. DIIs bought equities worth approximately ₹23,156 crore, helping absorb a significant portion of the selling pressure from foreign investors.
The continued strength of domestic institutional flows remains an important positive factor for the Indian market.
Rupee gains nearly 1 per cent
The Indian rupee also strengthened during the week.
The Reserve Bank of India’s FCNR(B) special swap window was closed on August 31, a month ahead of schedule. The facility helped mobilise more than $52 billion in NRI deposits.
The rupee gained nearly 1 per cent during the week and closed at around ₹94.48 against the US dollar.
A relatively stronger rupee could provide some relief by reducing the domestic impact of imported commodities, particularly crude oil. However, currency movements will continue to depend on global dollar trends, capital flows, crude prices and geopolitical developments.
What should investors watch next week?
The coming week could therefore remain highly sensitive to both domestic and global developments.
Investors are likely to keep a close watch on:
- West Asia geopolitical tensions
- Brent and WTI crude oil prices
- US inflation data
- Federal Reserve interest-rate expectations
- US 10-year Treasury yields
- FII and DII buying and selling
- Movement of the Indian rupee against the US dollar
- Global equity-market trends
Market outlook
The combination of geopolitical uncertainty, elevated crude oil prices and changing expectations around US interest rates could keep volatility high in Indian equities.
At the same time, strong domestic institutional buying, resilient economic growth and a relatively stronger rupee could provide some cushion against global pressures.
For investors, the immediate market direction is likely to depend less on any single factor and more on how these developments interact. Crude oil, US inflation, foreign fund flows and geopolitical developments are likely to remain the biggest triggers for the Indian stock market in the coming week.
This article is for informational purposes only and does not constitute investment advice. Investors should make investment decisions based on their own risk profile and consult a qualified financial adviser where appropriate.
