Pulse of the Street: Eight-week slide puts RBI, earnings in focus

Cheaper oil failed to bring much comfort for Indian equities as the markets slid for the eighth consecutive week. The Nifty 50 recorded its longest weekly losing streak since 2001 in a holiday-truncated week, with markets closed on Friday for Gandhi Jayanti. On Thursday, it fell 0.88% to 22,421.95, while the Sensex declined 0.79% to 71,909.69.

Their weekly losses stood at 3.11% and 2.69%, respectively, with the Nifty posting its sharpest weekly decline since the week ended 13 March 2026. The retreat has sharpened a question: is a recovery in sight?

Prasenjit Paul, fund manager at 129 Wealth and head of research at Paul Asset, said elevated oil prices, rupee weakness and higher US bond yields were driving foreign outflows. Yet the benchmark weakness concealed pockets of resilience, with select small caps and microcaps showing improving earnings and stock prices even as largecaps struggled.

The US 10-year Treasury yield climbed to around 5.3%, its highest since June 2007, while India's benchmark government bond yield hovered near 7.20%. Crude's retreat to about $96.30 a barrel offered relief, but proved insufficient to reverse market sentiment.

Paul believes equities already reflect expectations of higher interest rates and bond yields, limiting the scope for another sharp correction. "Unfavourable macro conditions will prevent a near-term bull run. We foresee Nifty to remain rangebound within the 22,000-24,500 range for the rest of 2026. Higher borrowing costs hurt debt-heavy companies, so investors should focus on growing businesses with minimal debt that fund most of their growth through cash generated by the business itself," he added.

On earnings trajectory, V.K. Vijayakumar, chief Investment strategist, Geojit Investments Ltd notes that If crude prices remain elevated for long, economic growth and corporate earnings will be impacted. "The market is concerned about this. In this context, 5.2% yield from the US 10-year bond becomes very attractive for FPIs," he added.

That assessment also faces a test at the RBI's Monetary Policy Committee meeting on 5-7 October. A Bloomberg survey comprising 12 estimates showed a median repo-rate forecast of 5.50%, implying a 25-basis-point increase from the current 5.25%.

"⁠A 25bp rate hike next week is highly probable. This is already largely discounted by the market. This will be negative for highly leveraged companies with high debt-equity ratios. Also, interest elastic sectors like real estate will have a negative impact. But banks will benefit from higher floating interest rates," said Vijayakumar.

For technology businesses, management confidence may matter more than whether subdued quarterly expectations are met.

"Earnings are not expected to be great. It's going to be about how confident the management is in the next 6 to 12 months," Anand K Rathi, co-founder of MIRA Money. Moving further, whether AI generates revenue beyond productivity gains will be closely watched in addition to net employee additions for signs of any job losses.

Vishnu Kant Upadhyay, assistant vice president-Research & Advisory at Master Capital Services, said expensive energy and currency weakness could squeeze businesses with limited pricing power, including paints and chemicals, aviation, logistics and automobiles.

India also lagged most markets in the global snapshot. Only Indonesia's Jakarta Composite, down 3.72%, fell more than the Nifty. France's CAC 40 and South Korea's KRX 100 lost 2.18% and 2.04%, respectively.

In contrast, Japan's Nikkei 225 led the gainers with a 3.91% rise, followed by Brazil's Ibovespa at 1.56%. Taiwan's Taiex and Hong Kong's Hang Seng posted smaller gains of 0.69% and 0.42%, respectively.

Going forward, a durable improvement in foreign flows would require easing global borrowing costs, a steadier rupee and sustained moderation in crude prices, Upadhyay said.