How will Nifty, Sensex behave on Monday? US Fed rate hike bets, among 4 factors to drive D-Street action

The Indian stock market closed in the green on Friday, although Sensex and Nifty erased most of the intraday gains to close near intraday lows after the closing auction session (CAS).

Sensex gained 363 points to close at 76,515 while Nifty 50 rose over 24 points to end the session below 23,898 on Friday. Broader markets closed mixed, with Nifty Midcap 100 slipping into the red, while Nifty Smallcap 100 closed in the green.

Here are major factors that drive market mood starting Monday


Oil gains again - Crude oil prices gained about 8% this week after US and Iran exchanged strikes after a month, reigniting fears of a supply crunch as the Strait of Hormuz remains shut for oil transit.

Citi raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing a longer-than-expected reopening timeline for the Strait of Hormuz.

Further, ANZ analysts also lifted their short-term Brent crude forecast to $95 a barrel, warning that prices could face further upside if the conflict in the Middle East intensifies.

Rising bond yields - A bond-market selloff of a scale not seen in decades is adding to concerns for Indian investors. Yields across major economies have risen to multi-year highs this week as markets contend with three key pressures: oil-driven inflation, tighter monetary policy and worsening fiscal conditions.

The surge in oil prices, along with a sharper rise in fuel costs, has pushed inflation and government borrowing costs higher globally. This has also heightened concerns that economic growth could weaken without some relief.

Rising bond yields also make US fixed-income assets more attractive by offering higher returns with relatively low risk. This can reduce the relative appeal of Indian equities, particularly for foreign investors, and encourage global capital to shift towards US fixed-income investments.

US jobs report ups rate hike bets - A stronger-than-expected US jobs report has put a September interest-rate hike firmly back in focus, leaving Federal Reserve Chair Kevin Warsh facing a difficult decision as President Donald Trump steps up calls for lower borrowing costs.

US employers added 162,000 jobs in August, nearly three times economists’ expectations, while the labour force participation rate rose to 61.6%. The increase in participation brought more people into jobs directly, helping keep the unemployment rate at 4.1% even as the pool of available workers expanded.

The report strengthens the case for the Federal Reserve to raise rates at its September 15-16 meeting, particularly after Warsh said last week that he needed confidence that inflation was moving back towards the central bank’s 2% target “clearly and at sufficient speed.” Without that, he said, “we have work to do.”

FII DII activity - Foreign investors are making a decisive return to Indian equities, with FPI inflows crossing $3.2 billion in August. The buying momentum has carried into September, with foreign portfolio investors pouring Rs 2,374 crore into Indian equities in the first four days of the month.

“The tapering of the chip trade and the FPIs turning consistent sellers in the chip stocks in South Korea and Taiwan have played an important role in bringing the FPIs back to India,” V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd said.

The resilience of the Indian economy, as indicated by the Q1 FY27 GDP growth rate of 7.8%, and the better-than-expected Q1 earnings numbers and stabilisation of the rupee are other positive factors that have the potential to sustain the positive FPI inflows into India. The massive $127 billion that came to India under the FCNR (B) scheme has strengthened the rupee significantly from the low of 96.96 to the dollar in May to 94.49 on 4th September.

What lies ahead of Dalal Street

Nifty’s technical picture provides little evidence of a sustained recovery at this stage. Nifty is comfortably trading below its short and long-term moving averages, while the 20, 50, and 100-day EMAs have started edging lower, indicating increasing bearish pressure, says Sudeep Shah of SBI Securities.

The daily RSI is hovering around 40 and remains below its 9-day average, while the daily ADX has moved above 20 and is rising, suggesting that the prevailing trend is gaining strength. With momentum and trend indicators weakening, the spotlight now shifts to a crucial support zone.

That support zone lies in the 23,750-23,700 region. The zone is important as the 61.8% Fibonacci retracement of the previous upmove from 23,070 to 24,774 is placed around this region. A sustained break below 23700 could intensify the correction towards 23,500, followed by 23,300.

On the upside, the hurdle is placed in the zone of 24,150-24,200 as it is the confluence of 50 and 100-day EMA levels. A sustained move above this range would be required to ease the prevailing bearish bias and bring stability back to the index.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)