Summary of this article
Crude oil and US bond yields remain key market cues this week
FPI selling could keep pressure on Indian equities and large-cap stocks
Investors will track PMI, core sector data, and forex reserves among other key economic data
Indian equities ended the truncated week lower as higher crude oil prices and rising global bond yields weighed on investor sentiment. Concerns that a prolonged escalation in West Asia could push energy prices higher, stoke inflation and hurt economic growth also kept investors cautious.
During the week, the Sensex fell 486.8 points, or 0.65 per cent, to 74,294.46, and the Nifty 50 lost 51.7 points, or 0.22 per cent, to settle at 23,346.40. Midcap and smallcap indices were largely flat after a choppy week, following several weeks of outperformance.
Brent crude climbed close to USD 110 per barrel on West Asia tensions and supply concerns before easing to around USD 104. The US 10-year Treasury yield crossed five per cent, its highest since 2007.
Higher oil prices can push up India's import bill, fuel inflation, squeeze corporate margins and weaken the rupee. Rising US yields can also pull money out of emerging markets and put further pressure on Indian equities.
The US Federal Reserve's 25-basis-point rate hike on September 16 has added to market concerns. Another hike could keep interest rates high, reduce spending and demand for technology services, and make emerging markets like India less attractive to global investors.
At home, wholesale inflation rose to 9.92 per cent year-on-year in August from 9.78 per cent in July. Headline inflation went up to 4.82 per cent from 4.45 per cent. Both stayed within the Reserve Bank of India’s (RBI) tolerance range.
Stock Market Cues To Track This Week
This week, investors will watch crude oil prices, US bond yields, the implementation of the new US sanctions law, foreign investor flows and key economic data.
US Sanctions Law, Crude Oil Prices
US President Donald Trump signed the Sanctioning Russia and Iran Act on September 18. The law allows his administration to impose tariffs of up to 100 per cent on countries that buy Russian oil and gas.
India could be affected as it is a major buyer of Russian crude. Trump will decide which countries face tariffs, how high they will be, and whether any sanctions will be waived. The law gives the administration 30 days to act.
Any move that limits India's purchases of Russian crude could increase the country's oil import bill and put more pressure on the rupee.
Brent crude will also remain a key market cue. A sustained rise in oil prices could increase costs for sectors that depend heavily on fuel and raw materials. It could also add to inflation and squeeze corporate margins.
US 10-Year Treasury Yield, Fed Rate Outlook
The US 10-year yield has crossed five per cent, which is hurting emerging-market equities. Investors will see whether it holds at this level after the Fed's latest 25-basis-point hike. High US yields make dollar assets more attractive and dull the appeal of emerging-market stocks.
A further rise could hurt the rupee and lift Indian bond yields. That would hit rate-sensitive sectors and reduce hopes of easier domestic financial conditions.
Foreign Portfolio Investor Flows
Foreign portfolio investors (FPIs) have pulled out Rs 20,974 crore from Indian equities in September so far. Their selling will remain an important market cue this week as high crude oil prices, rising US yields and geopolitical uncertainty continue to weigh on investor sentiment.
More FPI selling could put pressure on large-cap stocks, especially companies with high foreign ownership. If selling slows, it could provide some support to the broader market.
Infrastructure Output Data On September 21
The Ministry of Statistics and Programme Implementation (MoSPI) will release August data for India's eight core infrastructure sectors on Monday, September 21. The sectors are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. These sectors account for a large part of India's industrial output and give an early picture of economic activity. The core sector grew 5.4 per cent year-on-year in July.
US Manufacturing, Services PMI On September 23
S&P Global will release the US flash manufacturing and services PMI on Wednesday, September 23. It gives an early view of private-sector activity. Investors will look at new orders, employment and input costs for clues on growth and inflation.
HSBC Flash PMI Data On September 23
HSBC Flash India PMI for manufacturing, services and the composite will also come out on Wednesday, September 23. S&P Global compiles the survey for HSBC, and it shows private-sector activity before official data arrives.
Manufacturing PMI dropped to 52.8 in August from 53.5 in July. Services PMI was 54.1. Investors will track new orders, jobs and input costs in the September survey.
US New Home Sales On September 24
The US Census Bureau will release August New Home Sales data on Thursday, September 24. The data tracks sales of newly built single-family homes and gives a read on US housing demand.
Strong sales could point to a resilient US economy and keep interest rates higher for longer. That could push up US Treasury yields and the dollar, putting pressure on Indian equities through foreign investor flows.
Foreign Exchange Reserves On September 25
The RBI will release forex reserves data for the week ended September 18 on Friday, September 25. Reserves stood at USD 780.78 billion in the week ended September 11.
The data will be watched as the rupee faces pressure from costly crude, high US yields, and FPI outflows.
