The Indian stock market concluded the holiday-shortened week on a negative note on Thursday, with key domestic equity indices falling nearly 0.8 per cent. Sensex, the 30-share index of BSE, ended the session 570.59 points or 0.79 per cent to 71,909.70. NSE's Nifty50 closed at 22,421.95, down 198.50 or 0.88 per cent.  

Meanwhile, they remained highly volatile this week--Sensex fell 2.13, and Nifty plunged 3 per cent, from their respective closing values on September 25--last Friday. The BSE index nosedived over 1,500 points, while NSE's Nifty50 plummeted over 700 points from their last Friday's closing of 73,895.74 and 23,140.50, respectively.

Trading activities in the Indian equity market will remain shut on Friday, October 2, for Mahatma Gandhi Jayanti.   

According to analysts, a handful of developments would drive market sentiment in the upcoming week--starting from October 5. 

Stock Market Outlook For Next Week

According to analysts, the Reserve Bank of India's (RBI) monetary policy outcome will be the key domestic trigger for the domestic stock market next week. The central bank will have pressure to support the rupee and contain imported inflation, strengthening expectations of a rate hike. 

"Meanwhile,  India's PMI will indicate whether domestic activity is holding up against global headwinds, while US payrolls, PMI data and FOMC minutes will shape Fed expectations and the direction of global yields," said Vinod Nair, Head of Research, Geojit Investments Limited. 

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According to him, Q2 earnings are expected to be softer than Q1, and the sentiment is likely to remain fragile. 

"A meaningful de-escalation in West Asia could trigger a sharp relief rally. Until then, investors should stay selective, favouring earnings visibility and balance-sheet strength, while long-term investors may use market weakness to accumulate quality names gradually," Nair added. 

Top 3 Triggers For Stock Market Next Week 

1- RBI Monetary Policy Outcome: Central bank decisions and rate hike expectations aimed at supporting the rupee and containing imported inflation.

2- Domestic and Global PMI Data: India's PMI indicators alongside US payrolls, PMI data, and FOMC minutes shaping global yields and Federal Reserve expectations.

3- Q2 Earnings Outlook: Softer projected Q2 earnings compared to Q1 keeping overall investor sentiment fragile.

What Triggered Massive Sell-Off In Stock Market This Week 

Indian stock market had a difficult, holiday-shortened week which saw benchmarks slip below a key psychological level as a worsening global backdrop overwhelmed domestic support. 

"With crude prices surging, US Treasury yields neared two-decade highs on expectations of further Fed tightening, narrowing the India-US yield differential and weakening the rupee. FIIs stepped up selling through the week, while steady DII buying absorbed much of the outflow, cushioning but not arresting the decline," Nair noted. 

The downturn was not limited to frontline indices,  as broader markets fell as much as frontline indices. Heavy IPO issuance drew liquidity away from listed equities. 

"Sectoral weakness was concentrated in rate- and commodity-sensitive segments, with consumer durables, PSU banks, realty and metals under pressure, while autos saw sharper selling following weak wholesale sales data. The IT sector was the sole gainer, benefiting from rupee depreciation," Nair emphasised. 

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Conclusion

The stock market remained bearish this week, witnessing bloodbaths for at least two sessions amid broad base sell-off. Elevated crude prices, rate hike expectations and a rise in US bond yields kept investors’ sentiment subdued. Meanwhile, the banking and insurance sector remained under pressure due to new regulations for insurance commissions. IT sector also remained under pressure.