Indian stock market is expected to begin the new week on a volatile turf, as the rising crude oil prices, geopolitical uncertainty and Fed meeting have kept investors on edge to assess the momentum.
Indian equity markets witnessed a broad-based sell-off during the holiday-truncated week ended Friday, October 23, as benchmark indices declined amid weak global cues and elevated crude oil prices. The BSE Sensex fell 1,605.4 points — or 2.1 per cent — during the week, while the NSE Nifty 50 lost 546.2 points — or 2.4 per cent.
Both headline indices closed lower for the fourth session in a row as the decline extended through Friday. The index ended at 22,600, down 87.65 points — or 0.39 per cent — for the day while the Sensex settled at 73,123.83, losing 125.56 points — or 0.17 per cent.
The sell-off led to a sharp decline in the total market capitalisation of BSE-listed companies. The combined market capitalisation fell to Rs 4,51,83,393.14 crore on Friday, October 23, from Rs 4,67,93,267.82 crore on Monday, October 19, according to provisional exchange data.
This represents a decline of approximately Rs 16.10 lakh crore in the market value of BSE-listed companies over the period.
The fall in mcap coincided with losses across most sectoral indices, particularly chemicals, consumer durables, metals, media and real estate.
Selling pressure was also more pronounced in midcap and smallcap stocks than in frontline shares, indicating that the weakness extended beyond the benchmark indices.
Crude oil prices at 4-year high
Brent crude oil prices on Sunday crossed $116 per barrel, rising up to 3 per cent as expectations grew that US could escalate attacks on Iran.
US President Trump said Wednesday that Washington was not negotiating with Tehran and that something would happen “fairly soon.”
Traders are assessing the fresh threats with concerns that it may lead to energy supply crisis and put negotiations to end a months-long Iran-US war in tatters.
Any impact on the crude oil supply in the Middle East has implications on India due to its dependence, though it has tried to diversify its supply sources in recent times. India imports 80 per cent of its crude oil requirements, making it super fragile if the supply chain breaks down.
Higher crude oil prices will impact corporate margins, rising input cost, and transportation costs.
The US and Israel are reportedly planning fresh strikes on Iran after the midterm elections.
Iran-allied Houthi militants have continued attacks on Saudi Arabia, prompting the US State Department to order non-essential personnel to leave the country.
Staff of oil refineries in Saudi Aramco were instructed to evacuate its Dhahran headquarters and work remotely following an array of attacks.
Several civilians were killed in the fresh strikes at an airport and oil fields in Saudi Arabia.
Q2 earnings
The Q2FY27 earnings season will see another busy day on Monday, October 26, with several companies set to announce their July-September quarter results. The list will cover companies across different sectors, including banking, pharmaceuticals, consumer goods, technology and energy. Paytm, Mankind Pharma, Tata Consumer Products, ITC Hotels, Aavas Financiers, KFin Technologies, Nazara Technologies, Indian Overseas Bank, Bank of Maharashtra, REC, Dalmia Bharat, Sona BLW Precision Forgings and Supreme Industries are among the companies scheduled to report their earnings on Monday.
Fed Meeting
US Federal Open Market Committee (FOMC) will meet over two days to decide the interest rate ahead of the midterm elections. Fed is likely to hold interest rates steady, despite high inflation.
At its last meeting in September, the FOMC voted to raise the key federal funds rate for the first time in three years, lifting the target range to 3.75 percent to 4.0 percent.
The Fed’s meeting comes days ahead of key midterm elections in the United States on November 3.
Midcap and smallcap stocks are facing sharp selling pressure due to leveraged positions, liquidity constraints and a shift in investor preference towards largecap stocks, Gurmeet Chadha, chief investment officer and managing partner at Complete Circle Wealth, said.
Speaking on Zee Business, Chadha said the current market correction reflects several interconnected factors, including the unwinding of margin trading positions and liquidity being absorbed by the Jio IPO.
Why Are Midcap, Smallcap Stocks Falling?
Chadha said some large mutual funds have increased their allocation to largecap stocks while reducing exposure to midcap and smallcap shares. This has added to selling pressure in these segments, where low trading volumes can lead to sharp price movements.
He also said the Jio IPO has absorbed liquidity from margin trading and retail investor holdings. The unwinding of leveraged positions has further contributed to the correction.
Higher bond yields, rising crude oil prices and concerns over tensions in the Middle East have also weighed on investor sentiment. Chadha warned that market stress can spread across asset classes, affecting currencies, bond yields and the broader economy.
Chadha said investors should consider gradual buying rather than trying to predict the exact market bottom. He noted that midcap and smallcap stocks can experience sharp movements in both directions because of their higher volatility.
