Market this week: RBI policy, Q2 earnings, bond yields, FII flows, oil prices among 5 key factors to watch

Indian equities are set to enter another crucial week after benchmark indices - Sensex and Nifty - extended their losing streak to eight consecutive weeks, with persistent foreign selling, elevated global bond yields, firm crude oil prices and geopolitical uncertainty keeping investors on edge.

The Sensex fell 1,670.84 points, or 2.27%, to settle at 71,909.70 in the week ended October 1, while the Nifty50 declined 3.1% to close at 22,421.95. Technically, the 50-index Nifty also remained below its key 50-week exponential moving average, although the 200-week EMA around 22,381 offered some support.

This week will feature a packed domestic and global calendar, with the Reserve Bank of India’s monetary policy decision, the start of the Q2 FY27 earnings season, US bond yields, crude oil prices and the Federal Reserve’s meeting minutes likely to be among the key drivers of market sentiment.

1. RBI monetary policy decision

The RBI’s Monetary Policy Committee meeting from October 5 to 7 will be one of the biggest domestic triggers for Dalal Street. The central bank is expected to announce a 25 basis points hike on October 7, while maintaining a neutral stance. A neutral stance will give the central bank flexibility to keep adjusting policy rates as the economic situation evolves.

Investors will closely assess the central bank’s assessment of inflation, growth, liquidity and currency pressures, particularly as the rupee remains under pressure and elevated crude prices pose a risk to imported inflation.

With global yields remaining high and foreign portfolio investors continuing to withdraw funds from Indian equities, the RBI’s commentary on the growth-inflation balance and its policy stance will be closely watched.

2. Q2 earnings

The September-quarter earnings season is set to begin with index heavyweight Tata Consultancy Services (TCS) and Avenue Supermarts (DMart) scheduled to announce their results later in the week.

Investors will look for signs of resilience in corporate earnings amid elevated input costs, weak global demand in some sectors and a challenging external environment. Provisional quarterly business updates released by companies ahead of their results will also provide early clues on operating trends.

Anand Rathi Wealth, Can Fin Homes, Canara Robeco Asset Management Company and Poonawalla Fincorp are among other companies scheduled to announce their quarterly results next week.

The earnings season could assume greater importance as investors assess whether corporate profit growth can provide support to valuations amid sustained foreign selling.

3. US bond yields and FII flows

The sharp rise in US Treasury yields has emerged as a major headwind for emerging-market equities. The US 10-year yield has climbed to around 5.3%, increasing the relative attractiveness of US assets and putting pressure on foreign portfolio flows into markets such as India.

Adding to the woes, foreign institutional investors (FIIs) continued to remain net sellers last week, while domestic institutional investors (DIIs) provided a cushion through sustained buying.

According to provisional exchange data, FIIs sold equities worth ₹34,970 crore during the week, while DIIs invested ₹33,460 crore. In September, FII outflows stood at ₹44,010 crore, compared with DII inflows of ₹76,030 crore.

V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said sustained FII selling intensified during the final two trading sessions of the week. He noted that FIIs sold ₹45,536 crore through exchanges in September but invested ₹9,676 crore through the primary market.

The trajectory of US yields will therefore remain critical for the direction of global liquidity and foreign flows into Indian equities.

4. Crude oil and Iran-US tensions

Oil prices will remain another major market trigger, particularly given their implications for India’s inflation, current account and currency.

Brent crude has eased from recent highs and slipped below $98 a barrel, offering some relief to markets. However, geopolitical risks remain elevated amid uncertainty surrounding Iran and the Strait of Hormuz.

Developments around Iran’s proposal to reopen the Strait of Hormuz and negotiations with the US will be closely monitored. Any progress towards de-escalation could push the energy risk premium lower, while renewed military tensions or disruptions to oil supplies could trigger another surge in crude prices.

Ajit Mishra, SVP–Research at Religare Broking, said developments in the energy market would remain a crucial trigger for market sentiment. He noted that crude exports through the Strait of Hormuz had moved closer to pre-war levels, while the G7’s statement on releasing strategic reserves had also contributed to the moderation in oil prices.

However, uncertainty around the reopening of the strait and the possibility of renewed military action remains a risk for energy markets.

5. US economic data and FOMC minutes

Global investors will also track US economic indicators for clues on the Federal Reserve’s future interest-rate path.

The release of the minutes of the Fed’s September meeting on October 7 will provide further insight into policymakers’ assessment of inflation, employment and interest rates. Investors will also monitor key US high-frequency data, including the ISM Manufacturing PMI and labour-market indicators.

A weakening US labour market could strengthen expectations of a softer monetary policy trajectory and potentially ease pressure on Treasury yields. Conversely, stronger-than-expected economic data could keep yields elevated and reinforce the preference for US assets.

For Indian markets, the implications will extend to foreign portfolio flows, the rupee and overall risk appetite.

Technical outlook

Technically, the Nifty remains in a weak corrective structure, with the index trading below its 50-week EMA around 24,146. However, the 200-week EMA at 22,380.81 has emerged as an important support level, with the weekly close remaining marginally above it.

A sustained hold above the 200-week EMA could trigger consolidation or a technical rebound, while a decisive breakdown could intensify selling pressure.

Choice Institutional Equities said immediate resistance for the Nifty is placed at 22,800 and 23,000. A sustained move above this zone could ease the prevailing selling pressure and improve the short-term structure.

On the downside, support is seen at 22,350 and 22,180. A decisive break below the 22,180–22,350 zone could extend the corrective phase.

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