Following three straight weeks of gains, the markets had a severe decline, losing 4.5%, mostly due to unfavorable global cues. Beginning with growing tensions in the Middle East, which increased the price of crude oil due to concerns about supply disruptions, the mood was pessimistic. Further lowering market optimism was the ongoing FII selling, which sparked worries about a possible fund transfer to China after they announced several stimulus measures. Consequently, the benchmark Nifty and Sensex indices closed at 25,014.6 and 81,688.4, respectively, after settling near the week’s low.
Except for metals, all significant sectors closed down. The fall was widespread. Energy, car, and real estate were some of the worst declines. Interestingly, larger-cap companies were under more pressure; broader indices fared better, falling between 2.5% and 3.2%.
Several significant data releases and upcoming events could affect the direction of the market. Investors will actively watch the geopolitical environment and its effects on crude prices. The orientation of domestic flows and the foreign flow trend will also be critical. Notably, US markets have proven resilient in the face of increasing volatility, which may pave the way for an Indian market recovery as well.
Domestically, the outcome of the next MPC meeting on October 9 will be the main focus, and expectations for a rate decrease have been dampened by the recent spike in crude prices. Nonetheless, given the unpredictability of the world economy, any hint of a potential rate cut in the discussion might raise market sentiment. In addition, this week marks the beginning of the earnings season. On October 10, IT behemoth TCS is scheduled to release its results, and on October 11, IIP data is expected.
In terms of industry strength, IT, pharmaceuticals, and metals are leading the way, with other industries more susceptible to future profit-taking. It is recommended that traders restrict their long holdings and contemplate shorting weaker sectors until the Nifty reclaims the 25,600 mark with certainty.
