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Below the Quote on Weekly Market wrap up and week ahead from Ajit Mishra, SVP of Research at Religare Broking

Market Summary

Markets ended lower for the fifth consecutive week as elevated crude oil prices, rising global bond yields and concerns over US inflation weighed on investor sentiment.

The benchmarks started the week on a weak note and maintained that bias for most of the period. Consequently, the Sensex declined 2.27% to close at 74,781.76, while the Nifty fell 2.09% to settle at 23,398.10. Broader markets also remained under pressure, with the midcap index declining 1.40% and the smallcap index falling 0.88%.

Key Market Drivers

Geopolitical tensions and elevated crude oil prices remained the dominant drivers of market sentiment. Escalating US-Iran tensions raised concerns over disruptions to global energy supplies, while Brent crude retesting the US$110-per-barrel mark intensified worries over imported inflation, the current account, corporate margins and the rupee.

Rising US bond yields and expectations of a September Federal Reserve rate hike further pressured emerging-market equities. Investors remained cautious ahead of the US Federal Reserve’s monetary policy decision, particularly as the July meeting minutes highlighted continued concerns over persistent inflation and the possibility of further rate increases if price pressures remain elevated.

Sectoral Snapshot

Sectoral performance remained broadly negative amid the prevailing risk-off environment. Rising crude oil prices, higher bond yields and geopolitical uncertainty weighed on cyclical and rate-sensitive segments, while selling pressure remained broad-based.

The broader market also corrected during the week. However, the relatively smaller decline in the SmallCap index compared with the frontline indices suggests that selling pressure was somewhat more concentrated in large-cap stocks.

Key Events to Watch

Globally, developments in the US-Iran conflict and movements in Brent crude will remain critical market drivers.

The coming week will be dominated by the US Federal Reserve’s monetary policy decision and commentary on the future path of interest rates. Investors will closely assess the policy statement and comments from Fed Chair Warsh for indications of the central bank’s assessment of inflation, growth and the future rate trajectory.

On the domestic front, August WPI and CPI inflation data, followed by unemployment and balance of trade data, will remain in focus. These releases will provide important insights into inflationary pressures, labour-market conditions and the external sector.

The latest foreign exchange reserves data, due on 18 September, will also be monitored closely amid pressure on the rupee from elevated crude oil prices.

Technical Outlook Nifty

The Nifty witnessed significant selling pressure during the week and closed at 23,398, extending its corrective phase for the fifth consecutive week.

Going ahead, the 23,000–23,100 zone will be a critical support area. A decisive break below this zone could trigger a further decline towards the 22,400 level. On the upside, 23,600 will act as an immediate hurdle, while the 23,900–24,200 zone is likely to act as a major resistance area during the week.

Bank Nifty

Bank Nifty also remained under pressure amid the broader risk-off environment and rising bond yields. However, the index is showing relatively higher strength compared with the benchmark Nifty. It is likely to remain sensitive to global yields, currency movements and overall risk appetite.

Immediate support is placed around the recent swing-low zone of 55,500, followed by 54,800. On the upside, a decisive recovery above 57,200 would be required to indicate stabilisation and open the possibility of a rebound towards 58,000.

Market Breadth

Market breadth weakened during the week, with both midcap and smallcap indices declining alongside the benchmark indices. However, the relatively lower decline in the broader market indicates that selling pressure was not entirely indiscriminate.

The broader market remains vulnerable to further volatility if crude oil prices remain elevated and global risk sentiment deteriorates.

Strategy Ahead

The market enters the coming week with a cautious bias, as crude oil prices, geopolitical developments and the US Federal Reserve’s policy outlook remain key determinants of near-term direction. A sustained rise in crude oil prices could further pressure inflation expectations, the rupee and corporate margins, while a hawkish Fed stance could weigh on foreign flows and emerging-market sentiment.

Investors should adopt a selective and measured approach, focusing on companies with strong balance sheets, resilient earnings visibility and lower sensitivity to crude oil prices and global demand. Fresh positions should be staggered, with greater emphasis on risk management until the external environment stabilises.

For traders, volatility is likely to remain elevated around the Fed decision, inflation data and geopolitical developments. Positions should therefore be managed through disciplined position sizing and clearly defined stop-losses, while aggressive exposure during sharp market swings should be avoided.

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