Key Factors Set To Affect Stock Market Next Week: RBI Policy, Q2 Earnings, And FII Outflows In Focus

D-Street has faced relentless sell-offs in the past few weeks. In the extended period of weakness, the benchmark indices have closed in the red for eight consecutive weeks. The sell-offs have occurred due to several headwinds impacting the stock market at once. Notably, these include elevated crude oil prices to relentless foreign investor selling.

On October 1, the BSE Sensex closed at 71,909.70, down by 570.59 points or 0.79 per cent. On the other hand, the Nifty 50 closed at 22,421.95, down by 198.50 points, or 0.88 per cent. Domestic markets remained closed on October 2, in observance of Gandhi Jayanti.

Trading is set to resume on October 5, and market participants are bracing for a crucial week ahead. Here is a look at the factors expected to impact trade on D-Street.

RBI MPC Meeting

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting is set to take place this week. The MPC meeting is scheduled to commence on October 5 and conclude on October 7. The panel will announce its interest rate decision on October 7.

Investors will closely monitor the announcements made after the meeting and the market is expected to react to any potential shifts in RBI’s policy stance. With crude oil prices rising and retail inflation remaining a persistent concern, D-Street is speculating whether the central bank will hold the benchmark repo rate steady, or signal a potential rate hike to curb inflation. Commentary from the MPC is likely to influence banking, auto, and real estate stocks.

FII and DII Activity

Relentless selling by foreign institutional investors (FIIs) continues to remain a drag on the Indian equity market. Foreign investors have made net cash outflows of Rs 44,012.82 crore in September 2026 after selling Rs 3,57,535.80 crore against gross purchases of Rs 3,13,522.98 crore. Elevated US Treasury yields and shifting global asset allocations have made alternative markets significantly more attractive to overseas investors.

While domestic institutional inestors (DIIs) have managed to absorb a substantial portion of this selling, pumping in a net Rs 76,030.29 crore in September and another Rs 10,041.84 crore in October so far, the heavy volume of foreign outflows continues to dictate broader market direction. Traders will continue to watch daily institutional fund flow data closely. 

A drop in foreign selling can potentially signal relief for the stock market, whereas continued offloading can potentially maintain pressure on the stock market.

Corporate Earnings Season

With September marking the end of the second quarter of the financial year, the market is set to shift its focus to corporate earnings. The earnings season kicks off in October, and initial results alongside management commentary are likely to start coming in next week. Investors will assess how companies have navigated inflationary pressures, rural demand challenges, and currency fluctuations.

Global Bond Yields and Geopolitical Tensions

Global cues will continue to exert influence on domestic sentiment in the days ahead. Rising bond yields in the US, which recently hit their highest levels in years following a hawkish stance from the US Federal Reserve, are actively drawing capital away from emerging markets like India, with the benchmark US 10-year Treasury yield recently topping 5.34 per cent.

A stronger dollar is also expected to keep the Indian rupee under severe pressure. Additionally, geopolitical tensions in West Asia have caused a noticeable surge in crude oil prices, with Brent crude recently hovering near the $100 mark and settling at $99.43 a barrel.

Since India imports the majority of its crude requirements, elevated oil prices threaten to widen the current account deficit and fuel imported inflation. Market participants will watch out for international oil benchmarks and any developments in global geopolitics that could trigger sudden spikes in volatility.