Oil, Rates and FII Selling Keep Markets under Pressure

Indian equities remained under pressure through the holiday shortened week, with the Nifty and Sensex declining around 3.1% and 2.7%, respectively, following the Nifty’s 6.1% September decline. Rising oil prices, higher global yields, persistent FII selling and concerns over domestic rates continued to weigh on sentiment. Brent at $100 and expectations of a repo rate hike have increased pressure on valuations, while the rupee remains weak near ?96 per dollar.

The weakness is increasingly a multiple driven correction rather than an earnings led deterioration. GST collections remained strong and auto volumes were healthy, with major manufacturers reporting robust September sales. However, these positives were overshadowed by tighter financial conditions and foreign outflows. Sectorally, autos, metals and FMCG remained weak, while IT showed relative resilience.

Gold also corrected sharply amid rising rate expectations, although domestic bullion recovered towards the week’s close. Going ahead, oil, RBI policy expectations, global yields and FII flows remain the key variables. Until these pressures ease, valuation compression is likely to remain the dominant market driver.