What will drive stock market this week? US yields, crude and geopolitics in focus

Indian equities enter the week under pressure after benchmark indices extended their losing streak to a seventh consecutive week, with macroeconomic risks and geopolitical uncertainty continuing to weigh on sentiment. The NSE Nifty50 fell 0.88% to 23,140.50, while the BSE Sensex declined 0.54% to 73,895.74 last week.

With external factors continuing to dominate market sentiment, investors will keep a close eye on crude oil prices, the US-Iran situation, global bond yields and foreign fund flows. Adding to this, a slew of domestic and US economic data could influence the market’s near-term direction.

Crude oil, West Asia tensions in focus

Crude oil prices and geopolitical developments are likely to remain the biggest drivers of sentiment. Renewed tensions in the Middle East have raised concerns over India’s import bill, inflation and the rupee. Any progress on US-Iran diplomacy and a framework for reopening the Strait of Hormuz could ease energy prices and provide some relief to the domestic market.

“Market is likely to remain cautious as crude oil prices, geopolitical developments and global bond yields continue to influence near-term direction,” said Ajit Mishra, SVP–Research, Religare Broking.

He added that a sustained rise in crude could add to inflationary pressures and weigh on the rupee and corporate margins, while easing energy prices following progress on Iran-US negotiations could provide some relief.

US yields, Fed cues to shape global sentiment

Rising US Treasury yields remain another key overhang for emerging markets. Higher yields can make risk-free assets more attractive and put pressure on foreign flows into equities, says an analyst.

Last week, the US 10-year Treasury yield climbed to around 5.11%, while the 30-year yield touched its highest level since 2004, raising concerns about the trajectory of US interest rates.

Investors will track US job openings, GDP, core PCE inflation and PMI data, along with commentary from Federal Reserve officials, for cues on the future rate path and global liquidity.

Vinod Nair, Head of Research, Geojit Investments, said rising US yields had pressured emerging-market flows, allowing external factors to override the comfort from improving domestic macro indicators. He added that with crude exposed to geopolitical developments and yields elevated, valuation expansion could remain constrained, leaving earnings delivery as a key driver of returns.

Domestic data on radar

On the domestic front, investors will track August industrial production data, government budget data, the external debt position and the HSBC Manufacturing PMI reading due during the week. Foreign exchange reserves data for the period will also be released on October 2.

The data will be watched against the backdrop of improving growth expectations. S&P Global Ratings, Fitch Ratings and the OECD have raised their FY27 GDP growth forecasts for India to 7%, 6.9% and 7.1%, respectively, citing economic resilience and strong domestic growth.

Nair said India’s flash PMI estimates for September came in stronger than expected, pointing to resilient activity across manufacturing and services. According to him, the strength in domestic activity, alongside steady domestic liquidity, should provide some support to the market even as external risks remain elevated.

FII selling remains a key swing factor

Foreign investor selling continues to weigh on domestic equities. FIIs remained net sellers for a fifth straight week, offloading ₹11,490 crore, while domestic institutional investors bought ₹16,398 crore, providing a counterbalance.

Ravi Singh, Chief Research Officer, Master Capital Services, said persistent foreign selling had dragged domestic benchmarks lower, with midcaps underperforming large caps amid broader risk reduction.

The divergence between foreign selling and steady domestic liquidity will remain important for market direction, particularly if global yields and geopolitical risks remain elevated.

Insurance stocks in focus after IRDAI proposal

The financial sector could continue to remain in focus following the IRDAI consultation paper on insurance commissions and expense management. The proposed framework has triggered a sharp sell-off in insurance stocks last week, with investors concerned about the potential impact on distribution revenues and earnings.

Singh of Master Capital Services said the proposed framework, which includes caps on distribution commissions and lower Expense of Management ceilings, has raised concerns over near-term revenue margins and earnings.

Financials were among the key laggards last week, while technology also remained under pressure. In contrast, realty, pharma and FMCG were among the stronger segments.

Nifty support at 23,000

Technically, the Nifty remains in a corrective phase after seven consecutive weekly declines. The 23,000--23,100 zone is the key support area, while 23,600 is the immediate hurdle. A decisive break below 23,000 could open the way towards the 22,400–22,600 zone, according to Mishra.

Singh said the Nifty remains below its 21-, 55-, 100- and 200-day EMAs, indicating continued weakness. He identified 23,000 as the immediate support and 23,450 as the key resistance level.

The Bank Nifty also remains under pressure after declining 1.38% last week. Support is seen around 54,800-54,400, while 56,500-57,000 remains the resistance zone.

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