Indian benchmark indices extended their decline for the fourth consecutive session as BSE Sensex plummeted 1,200 points in mid-session to a more-than-two-year low level before recovering to close 571 points (0.8%) down at 71,910 points. NSE Nifty also showed similar trajectory, closing 199 points (0.9%) down at 22,422 points. According to The Times of India, this represents the first time in 25 years that both leading indices recorded lower weekly closes for eight consecutive weeks. The sharp decline came amid rising bond yields in almost all major markets around the world, along with spiking crude oil prices and a weak rupee, which spooked investors on Dalal Street. Foreign institutional investors continued their aggressive selling spree on October 1, offloading ₹9,484 crore in Indian equities, taking their total selling over the past three days to nearly ₹29,612 crore. This latest outflow follows ₹10,148 crore sold on September 30, ₹9,980 crore on September 29 and ₹5,353 crore on September 28. The September 30 outflow was the largest single-day outflow in nearly six months and higher than the ₹9,980 crore sold on September 29.
Despite the relentless foreign selling, domestic institutional investors (DIIs) remained strong buyers, purchasing shares worth ₹10,042 crore on October 1 to offset the FII outflows. According to provisional exchange data, DIIs were net buyers in all 21 trading sessions of September, with cumulative purchases of around ₹76,030 crore. This means domestic institutional buying more than offset foreign selling on a net-flow basis during the month, although the persistent FII outflows have continued to weigh on market sentiment. DIIs bought ₹11,272 crore on September 30, ₹6,953 crore on September 29 and ₹5,189 crore on September 28, providing crucial support to the Indian markets. The domestic institutional support has been particularly significant given the challenging global backdrop and elevated crude oil prices that have raised concerns over India's import bill and inflation outlook.
The pace of foreign institutional investor selling has accelerated dramatically, with ₹29,612.85 crore outflow recorded in just three days from October 1-3. According to The Financial Express, this represents a significant escalation from the previous four-day selling spree that totaled nearly ₹34,965 crore. The latest data shows ₹9,484 crore sold on October 1, ₹10,148 crore on September 30, ₹9,980 crore on September 29 and ₹5,353 crore on September 28. Market experts attribute this surge to multiple factors, with Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noting that the most important reason is the spike in US bond yields with the 10-year yield crossing the 5.2% mark. Market veteran Ajay Bagga believes the step up in FII selling is primarily on account of rising global bond yields, especially the US Treasuries, with 5% plus risk-free returns available in US dollars leading to a flight of capital from EMs to the US. The Dollar Index is now averaging between 101-102 levels, last seen in June, and decidedly the highest it has risen in 2026 so far.
The persistent $100 crude oil prices have emerged as a major concern for oil-importing nation India, with crude rates seeing a nearly 65% jump since January 2026 and maintaining levels above $100 per barrel for more than 6 months. According to The Financial Express, market veteran Ajay Bagga considers rising geopolitical risk due to the threat of an escalation in the US-Iran war as the second reason, with risk-off moves happening across assets. Kotak's Shrikant Chouhan added that the major concern is the crude prices sustaining above the level of $100 for a longer time, causing an inflationary trend globally. Vijayakumar also reiterated that Brent crude staying above $100 is another worry, with potential to impact India's GDP growth and corporate earnings in FY27. The 13% monsoon deficit and emerging drought-like conditions in many regions, with Maharashtra already announcing drought, have further stoked inflation fears.
Market experts are closely watching the RBI policy next week and how the drought situation pans out going forward, with October starting on an equally sombre note with the first trading session accounting for over ₹9,000 crore outflows. According to The Financial Express, any signs of resolution of the US-Iran situation and easing of yield would be seen as encouraging developments. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that an apparent contradiction in FII activity is that even while selling through the exchanges, they have been consistently investing through the primary market and also buying expensive mid and smallcaps. The monthly flow pattern has been volatile in 2026, with foreign investors selling shares worth around ₹2.69 lakh crore so far, including ₹49,340 crore in June, ₹20,200 crore in July, ₹29,631 crore in August and around ₹35,861 crore in September. Large-cap stocks, particularly in the banking and IT sectors, gained momentum as investors gravitated towards relatively attractive valuations and a higher margin of safety amid prevailing macro uncertainties.
