Indian stock markets extended their losing streak to eight consecutive weeks, with both benchmark indices closing at multi-year lows. The Nifty 50 dropped 3.1% to close at 22,421, while the Sensex fell 2.7% to end at 71,909 during the holiday-shortened week. According to The Economic Times, this represents the longest losing sequence in 25 years for Indian equities. The broader market weakness was severe, with the Nifty Midcap 150 declining 3.5% to 21,643 and the Nifty Smallcap 250 losing 3.1% to 17,589. The India VIX rose 18.9% to 14.46, indicating heightened volatility and investor uncertainty across all market segments.
Sectoral performance was broadly negative with consumer-facing sectors bearing the brunt of the selloff. As reported by The Economic Times, Consumer durables declined 6.1%, Automobiles fell 5.9%, Metals dropped 4.8% and FMCG declined 4.7%, all underperforming the Nifty 50. Weak September vehicle sales, rate sensitivity and concerns over household demand hurt automobiles and consumer-facing sectors. Nifty IT was the only major sector to end higher, gaining about 0.5%, receiving support from the weaker rupee and lower expectations of an immediate US rate increase. Nifty Private Bank declined about 0.7% and Nifty Bank fell 2%, making both relative outperformers despite negative absolute returns.
Global market stress is already feeding into fuel demand, bond yields and borrowing costs, according to UIDAI Chairperson and World Bank Executive Director Neelkanth Mishra. As reported by ANI, Mishra noted visible strains in global markets due to rising fuel prices and a slowdown in global fuel-demand growth. The sharp rise in bond yields has led to increased borrowing costs that are impacting financial conditions worldwide. Mishra emphasized that the bond yields have gone up so substantially that it is already pinching, with the impact being felt in the mortgage market through higher mortgage rates and reduced new mortgage issuance. The stress is already visible rather than being a future risk, as financial conditions continue to tighten globally.
The sharp rise in US Treasury yields represents one of the biggest global-market headwinds for Indian equities. As reported by The Economic Times, the US 10-year Treasury yield touched a 24-year high, with the US 30-year yield reaching 5.62%, marking the highest level since 2002. The Federal Reserve will publish minutes from its September 15-16 meeting on Wednesday, October 7, while the September jobs report showed growth of just 29,000, below the 90,000 expected. The softer labour-market data supported expectations of a Fed pause, with markets pricing a 22.7% probability of an October rate hike, down from 64.2% a week earlier. The US bond market and treasury supply will be an important global trigger after the elevated yield levels.
Banks and NBFCs will be in focus ahead of the RBI policy decision on October 7, with experts believing a 25 basis point increase in the repo rate to 5.50%. As reported by The Economic Times, only 8% of NIFTY50 stocks were trading above their 50-day moving average as of October 1, indicating widespread weakness across the index. A rate increase would have different effects across lenders, with banks potentially benefiting if floating loan rates rise faster than deposit costs, though this benefit could narrow as deposits reprice. NBFCs relying on bank loans and market borrowing could face margin pressure if funding costs rise. The sector's performance was uneven, with Nifty PSU Bank falling more than 4% while Yes Bank, LIC Housing Finance, SBI Cards and HUDCO were among the laggards.
Foreign institutional investors continued their selling streak, with FIIs selling equities worth ₹34,966 crore during the week ended October 1, extending their selling streak to six weeks. According to The Economic Times, domestic investors bought equities worth ₹33,455 crore during the same week, absorbing most of the FII selling. For September as a whole, domestic investors remained net buyers to the tune of ₹76,030 crore. The NIFTY50 index continues its sequence of lower highs and lower lows, remaining below the falling 20-day EMA and 50-day EMA, keeping the prevailing structure bearish. Immediate support stands between 22,182 and 22,331, with a daily close above 23,070 being an initial sign of improving price structure.
