Indian equity markets have experienced severe pressure in September, with the Sensex tumbling more than 2,200 points, or 3%, and the Nifty 50 losing 812 points, or 3.4% during the month. According to Business Standard, both benchmark indices have closed higher on just two occasions so far in September. On Tuesday (September 15), markets opened higher led by strong rallies in IT stocks and HDFC Bank, with the Sensex climbing 655 points, or 0.87%, to hit an intraday high of 75,436, and the Nifty surging 194 points, or 0.83%, to touch 23,592. However, gains were given up as the session progressed, with the Sensex trading 260 points lower at 74,510 and the Nifty falling 115 points to 23,280 as of 1:30 PM. The India VIX spiked 5.4% to 12.95, indicating heightened volatility and caution among traders amid increased market uncertainty. At the last hour of trading, 38 stocks on the NIFTY50 index were trading lower, with the Nifty 50 declining 0.95% to 23,176.45 and the BSE Sensex falling 577.18 points, or 0.77%, to 74,204.58. GIFT Nifty September 2026 futures were down 24 points, indicating a negative start for the Nifty 50 on Friday.
Despite the sharp rise in headline Nifty over the past five years, the return looks far less impressive once the rupee's decline against the dollar is considered. The Nifty measured in US dollars has fallen back to around 242, a level last seen around September 2021, as reported by Moneycontrol. The Nifty has moved from roughly the 17,500 area in September 2021 to around 23,200 currently, but the rupee has weakened from around the mid-70s against the dollar to close to ₹96, absorbing a large part of the equity-market gains for dollar-based investors. This currency depreciation explains why recent currency weakness matters beyond the forex market, as when the rupee falls sharply, India's headline equity performance can look considerably weaker in dollar terms. The timing is significant as the rupee has recently come under renewed pressure, closing at around 96 per dollar on September 16, its weakest level in more than a month, amid rising Brent crude prices and expectations of tighter US monetary policy.
The US Federal Reserve raised its benchmark interest rate by 25 basis points to 3.75%-4% on Wednesday, September 16, marking the first rate hike since 2023. According to Reuters, Morgan Stanley expects the Fed to deliver another quarter-point increase in December, following recent US inflation data that came in stronger than expected. The change in expectations has been particularly sharp - barely two weeks ago, the CME FedWatch tool showed a 60% probability of a rate cut, while traders are now pricing in a 92.5% chance of a Fed rate increase, marking the first potential hardening in more than three years. The Fed's indication of another rate hike in 2026 kept investors cautious, particularly across rate-sensitive and foreign-portfolio-investment-driven segments. The higher US rate environment supported the dollar and kept pressure on emerging-market currencies. The benchmark 10-year US Treasury yield crossed the crucial 5% mark this week for the first time since 2023, as traders increasingly expect the Federal Reserve to keep interest rates higher for longer.
Foreign investors pulled out ₹3,208.76 crore from Indian equities on September 17, while domestic institutional investors were net buyers to the tune of ₹3,617.75 crore, according to provisional data from Business Standard. Foreign portfolio investors (FPIs) sold shares worth ₹20,041.11 crore in September so far through 17 September 2026, following net cash purchases of ₹17,366 crore in August 2026 and net buyers of ₹6,731.97 crore in July 2026. The latest outflow comes amid surge in Brent crude prices, with oil prices rising over 20% so far this month, creating a key headwind for markets. Higher oil prices are particularly important for India because the country is a major crude importer, and a weaker rupee makes those imports even more expensive in domestic currency, creating another pressure point for inflation and corporate margins.
Global markets showed mixed performance with most Asian indices trading higher on Friday, following an overnight rally on Wall Street and a drop in crude oil prices. US stock market ended higher on Thursday amid easing oil prices, dropping Treasury yields after strong labour data. The Dow Jones Industrial Average rallied 0.61%, while the S&P 500 gained 1.14% and the Nasdaq Composite closed 1.69%. The rally in US technology stocks lifted the Nasdaq index, with Nvidia stock price surging 2.54%, AMD shares jumping 6.36%, Intel share price spiking 7.67%, Apple stock price rising 1.38%, Microsoft shares gaining 1.52%, and Amazon share price rallying 2.13%. Crude oil prices extended losses for a third session on hopes of limited supply disruption, with Brent crude futures falling to $104 a barrel level. Reports emerged of additional Saudi crude shipments through Oman, easing supply worries. Gold and silver bounced back on Wednesday, with MCX gold at ₹1,51,850 per 10 grams, up ₹1,040, and MCX silver at ₹2,35,421 per kg, up ₹3,303, as bargain hunting and short covering set in after a three-week selloff in both metals.
