Weekly Market Wrap: Equity markets witness worst week in over two years amid global uncertainty

Weekly market wrap: Equity markets closed their worst week in over two years, with both the NSE Nifty 50 and BSE Sensex tumbling more than 4 per cent. Mounting global tensions, particularly in the Middle East, have jeopardised market sentiments, further fueled by the uncertainty around key economic data from the US and other global markets.

This week, the Nifty 50 dropped 4.5 per cent, while the Sensex plunged similarly, marking their steepest decline since June 2022. Major contributors to this downward trend were losses in key stocks like Hero MotoCorp, Shriram Finance, and Axis Bank . As the global landscape continues to be rocked by geopolitical instability, the Indian market's performance reflects broader concerns.

On Friday, both indices witnessed significant volatility, swinging from an intraday high of 1 per cent to a steep decline by market close. The Nifty closed 0.79 per cent, or 200.25 points lower, at 25,049.85, while the Sensex ended the day down 0.98 per cent, or 808.65 points, at 81,688.45.

Global Factors Drive Market Decline

The ongoing geopolitical tensions between Israel and Palestine have reverberated across global markets. A particularly unsettling factor was Iran's Supreme Leader Ayatollah Ali Khamenei's warning about another possible strike on Israel, which rattled investors worldwide. In addition, US President Joe Biden’s comments on Iran’s oil reserves added further uncertainty to energy markets, as Brent crude prices surged nearly 10 per cent during the week. This spike in oil prices has further weakened global market sentiment, contributing to the sell-off in Indian equities.

In anticipation of the US payroll data for September, investors remain on edge. The US services PMI increased to 54.9 in September, beating the forecast of 51.7, and US private payrolls saw a jump of 1,43,000 jobs, outpacing expectations of 1,40,000. On the domestic front, India’s manufacturing PMI for September fell slightly to 56.5 from 57.5 in August, signaling a slowdown in manufacturing activity. The eight core industries index contracted by 1.8 per cent in August, the first decline in 42 months, led by a downturn in coal, crude oil, and natural gas production.

Key Sectors and Market Performance

Among Indian stocks, heavyweights such as HDFC Bank , Reliance Industries, ICICI Bank , and Mahindra & Mahindra led the market decline. However, IT majors like Infosys , Tata Consultancy Services, and ONGC helped cushion the fall to some extent. Broader market indices also fell, with the BSE Midcap and Smallcap closing 0.94 per cent and 0.80 per cent lower, respectively.

Out of 20 sectors on the BSE, 19 ended in the red, with FMCG emerging as the worst performer. The BSE IT index was the only sector to post gains during the week, underscoring the resilience of technology stocks in an otherwise downbeat market. Market breadth was notably skewed in favor of sellers, with approximately 2,479 stocks declining, while only 1,579 stocks advanced. Around 110 stocks remained unchanged.

Foreign Institutional Investors Pull Back

The impact of foreign institutional investors (FIIs) selling off Indian stocks was another significant factor in the week’s market plunge. FIIs offloaded stocks worth Rs 30,484 crore during the week, likely due to risk-off trade and a shift of investment from Indian equities to Chinese markets, where cheaper valuations and stimulus measures by the Chinese government have made it more attractive.

Corporate Sector News

While markets struggled, several key corporate developments took place. Among the top news, Tata Power announced a major investment of Rs 1.2 trillion in Rajasthan, focusing on power distribution, transmission, and green transition efforts. Similarly, Indian Oil Corporation signed a B2B framework agreement with Nepal Oil Corporation for significant petroleum infrastructure development.

Welspun Enterprises secured a water tunnel project worth Rs 1,990 crore from the Brihanmumbai Municipal Corporation. In the defense sector, Bharat Electronics got the government's approval for a 40-60 joint venture with Israel Aerospace Industries to support medium-range surface-to-air missile systems used in India.

UltraTech Cement announced an increase in its stake in Continuum MP Windfarm to 5.46 per cent from 3.28 per cent by investing Rs 24.35 crore. Additionally, Piramal Pharma announced an $80 million expansion plan for its Sterile Injectables facility in Kentucky, signaling growth in its international operations.

Other notable corporate developments included Ujjivan Small Finance Bank securing an Authorised Dealer Category I license from the RBI , and GE Power India receiving a significant order for boiler parts worth Rs 21 crore from MP Power Generating Company.

Economic Data and Outlook

India’s manufacturing sector continued to grow but at a slower pace in September. The Purchasing Managers’ Index (PMI) fell to 56.5 from 57.5 in August, its lowest reading since January 2024. Additionally, the eight core industries’ output contracted by 1.8 per cent in August, breaking a streak of 42 months of continuous growth. Excessive rainfall impacted the mining industry, with contractions in coal, crude oil, and natural gas output, alongside a decline in electricity generation.

On the global stage, market participants are closely watching developments in the US, especially with the upcoming release of CPI and PPI data for September. The US Federal Reserve's policy outlook, as reflected in the minutes of its September meeting and upcoming speeches by Fed officials, will also be closely tracked by investors worldwide.

Technical Indicators Point to Further Weakness

Technically, the Nifty 50 index has dipped below its 50-day Exponential Moving Average (EMA) for the first time in 84 trading sessions, signaling further weakness, SBI Securities said in a research report. The 20-day EMA and 50-day EMA are also showing signs of turning lower, while the 100-day and 200-day EMA are losing upward momentum. With the Nifty’s daily Relative Strength Index (RSI) nearing the 40 level, bearish sentiment is building, indicating the possibility of continued selling pressure in the near future, the report added.

Volatility has surged, with the India VIX climbing over 18 per cent during the week, underscoring heightened uncertainty and risk aversion among market participants. Support levels for the Nifty are seen around the 24,800-24,750 range, with the 100-day EMA at 24,375 acting as crucial support should the index slip further, SBI Securities said.

Market Outlook

Looking ahead, markets will focus on key economic data releases, including the US Consumer Price Index (CPI) and Producer Price Index (PPI) for September, along with interest rate guidance from the Federal Reserve. In India, the Reserve Bank of India's ( RBI ) monetary policy meeting on October 9 will be crucial in determining the future trajectory of domestic interest rates and inflation management.

With global uncertainty showing no signs of abating, investors are advised to remain cautious and stick to quality stocks in sectors like auto, jewelry, and energy, which may offer resilience amid the broader market turmoil.