CHENNAI: Indian equity markets ended the truncated trading week on a cautiously positive note, rebounding after midweek volatility driven by foreign fund outflows, currency weakness, and sector rotation. Despite the late recovery, overall sentiment remained restrained as investors weighed mixed global cues and domestic macro pressures.
The benchmark indices closed higher for the week, supported by buying in select banks, consumer, and metal stocks. The Sensex gained around 224 points on October 3, while the Nifty managed to hold above the 24,850 mark. The rebound followed a brief pullback midweek when financials dragged indices lower.
Throughout September, foreign portfolio investors continued to pare exposure, withdrawing about US $2.7 billion from Indian equities. This persistent outflow has been a key overhang for markets, as global investors turned cautious on emerging assets amid rising U.S. yields and a firm dollar.
The Indian rupee remained under pressure, ending the week near ₹88.77 to the US dollar, just shy of record lows. Although trading was largely subdued on Friday, analysts expect depreciation pressures to persist unless foreign inflows stabilize.
Sectoral Trends
The market’s strength during the week came largely from consumer, metal, and auto stocks, while financials remained volatile. Tata Steel gained more than 3 percent on October 3, leading the metal pack. Auto sentiment was upbeat after Maruti Suzuki reported a 26% year-on-year increase in September production, signaling healthy demand ahead of the festive season.
In contrast, banking and financial stocks faced selling pressure during parts of the week, despite a brief boost from the Reserve Bank of India’s move to ease lending rules for capital market exposure. Investors appeared cautious about near-term earnings and asset quality trends.
Brokerages highlighted defence, electronics, and financial services among sectors to watch. Goldman Sachs initiated coverage on several Indian defence stocks with potential upsides of up to 58%, reflecting optimism around India’s manufacturing and strategic sector growth.
On the technical front, the Nifty continued to face resistance near the 24,750–25,000 zone, while key support levels were seen around 24,400–24,500. A sustained break below these levels could trigger further downside, but the late-week rebound provided temporary relief. The India VIX cooled off slightly, suggesting reduced volatility after a choppy start to the week.
Outlook
Analysts expect the near-term trend to remain range-bound, with limited room for aggressive gains unless foreign flows turn supportive. Market direction will likely hinge on upcoming macro data, the rupee’s stability, and global rate signals.
Key factors to watch next week include:
Movement in foreign institutional investment flows.
Currency performance amid dollar strength.
Corporate earnings guidance from key financial and IT firms.
US and global macro indicators influencing risk appetite.
In conclusion, the opening week of October brought a partial recovery for Indian equities following September’s decline, though persistent global risks and domestic currency concerns continue to temper investor confidence.