Nifty logs 7th straight weekly loss for the first time in 6 years: Time to be fearful, or can bulls pull off a comeback?

Indian equities remained under pressure this week, with the Nifty 50 extending its losing streak to seven weeks—the longest in six years—as elevated crude prices, rising US Treasury yields, geopolitical uncertainty and accelerating FII outflows kept risk appetite subdued.

The Nifty fell about 0.88% for the week, despite a late rebound as oil prices eased and value buying emerged. Foreign investors remained the key drag, pulling out roughly Rs 18,531 crore so far this month through September 25, even as domestic institutions absorbed the selling with purchases of around Rs 52,617 crore.

Analysts believe crude oil prices, global bond yields, geopolitical developments and FII flows will drive Indian equity markets next week. US economic data and Federal Reserve commentary will be closely watched for cues on interest rates and global liquidity, while domestic industrial data will offer a read on the strength of India’s growth momentum.

Crude oil and geopolitics: Can easing prices offer some relief?

Crude oil is likely to remain a key variable for Indian equities, with elevated prices continuing to weigh on inflation, corporate margins and the domestic macroeconomic environment.

Vinod Nair, Head of Research, Geojit Investments, said investors were closely tracking developments around the US-Iran conflict and prospects for renewed diplomatic engagement, as well as US-China discussions.

"Although crude oil prices ended the week lower, heightened volatility kept inflation concerns elevated, weighing on overall market sentiment. Offsetting this, India's flash PMI estimates for September came in stronger than expected, pointing to resilient activity across manufacturing and services," Nair said.

He added that rising US yields continued to pressure emerging-market flows, allowing external factors to outweigh domestic macroeconomic comfort.

Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, said Brent crude near $105-106 a barrel remained too elevated to provide meaningful macroeconomic relief.

"Progress in US-Iran negotiations could help reduce the geopolitical premium in oil prices, while renewed escalation or disruptions to supply could intensify inflationary pressures," Radhakrishnan said.

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Ponmudi R, CEO of Enrich Money, said Brent crude remaining above $100 continued to pressure domestic macroeconomic conditions and corporate margins, although the recent moderation in oil prices offered some near-term relief.

"A continuation of the decline could provide further support to domestic equities, while any renewed escalation in the Middle East could quickly reverse the trend," Ponmudi said.

He also pointed to Iran's seven-day proposal to the United States aimed at ending the ongoing conflict and reopening the strategically important Strait of Hormuz.

"The development could ease concerns over global energy-supply disruptions if negotiations progress, potentially reducing the geopolitical risk premium in crude oil," he said. "However, the proposal remains conditional on US acceptance, leaving markets sensitive to further developments in the negotiations."

Fed, yields and economic data: Will global liquidity remain a headwind?

Global bond yields and incoming US economic data will be another major focus as investors assess the Federal Reserve's policy path and its implications for emerging-market flows.

Radhakrishnan said US economic data would take centre stage, with labour-market indicators, inflation readings and manufacturing data likely to shape expectations for monetary policy.

"Stronger-than-expected readings could keep Treasury yields and the dollar elevated, tightening financial conditions for emerging markets and potentially weighing on the rupee, foreign portfolio flows and Indian equity valuations," Radhakrishnan said.

"Conversely, softer data could ease rate concerns, lower bond yields and create room for a relief rally across risk assets," he added.

"The US 10-year Treasury yield, currently near 5.2%, will remain another important constraint on global risk appetite," Radhakrishnan said.

Nair said domestic IIP data would test the durability of industrial activity, while US job openings, GDP, the core PCE deflator and PMI readings, along with commentary from Federal Reserve officials, would frame expectations on the rate path and global liquidity.

Ponmudi said further increases in yields and the dollar could weigh on emerging-market capital flows, while moderation in yields could provide some relief.

"With the Federal Reserve having recently raised rates and maintained a hawkish stance, incoming economic data could play an important role in shaping expectations for further policy tightening and global financial conditions," Ponmudi said.

FII selling, domestic liquidity and growth: Can Nifty find a floor?

Persistent foreign selling has weighed on domestic benchmarks, while strong domestic institutional participation has provided some cushion.

Nair said persistent foreign selling had dragged domestic benchmarks lower, with midcaps underperforming large caps amid broader risk reduction.

"With crude hostage to geopolitics and yields elevated, valuation expansion looks constrained, leaving earnings delivery as the principal driver of returns," Nair said.

"The strength in domestic activity signalled by the PMI, alongside steady domestic liquidity, should limit the downside, though investors would be prudent to stay selective and favour earnings visibility and valuation comfort," he added.

Ponmudi said the seven consecutive weekly declines had left the market oversold, while strong DII participation could support intermittent recovery attempts.

"However, a durable improvement in sentiment will depend on stability in crude oil prices, global yields and geopolitical developments, along with a moderation in FII selling," he said.

Radhakrishnan said domestic industrial and manufacturing indicators would provide a read on whether India's growth momentum can withstand higher energy and borrowing costs.

"Strong readings could support cyclical stocks, while weaker data may reinforce concerns about slowing demand," he said, adding that China's manufacturing data would also warrant attention, particularly for metals and other globally exposed sectors.

Technical view: Can Nifty defend 23,000?

The technical setup remains under pressure, with 23,000 emerging as the key immediate support level.

Ponmudi said Nifty 50's broader technical structure remained weak, with the index trading below key moving averages.

"On the upside, 23,200 remains the immediate resistance zone. A sustained move above 23,300 could provide some stability and support a recovery toward the 23,500 region. However, unless the index decisively reclaims this band, recovery attempts could continue to face selling pressure," Ponmudi said.

"On the downside, 23,000 remains the immediate and crucial support level. A decisive break below 23,000 could intensify selling pressure and expose the index to the 22,800 region," he said.

Disclosure: This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here