Foreign capital is accelerating its exit; India’s stock market faces its 'worst consecutive decline in twenty-five years'!

Meanwhile, Indian markets were closed on Friday due to a local holiday. Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, stated: 'Given that markets will be closed tomorrow, today’s trading reflected cautious portfolio rebalancing ahead of an extended holiday.' Foreign institutional investors’ (FIIs) selling pressure surged sharply, setting a new annual record for net outflows. Data shows that on September 30 alone, FIIs net sold approximately USD 1.06 billion (roughly INR 101.48 billion) worth of Indian equities. By comparison, over the previous five trading days, FIIs had collectively sold about USD 3.6 billion—averaging roughly USD 720 million per day. Thus, Wednesday’s single-day outflow markedly exceeded this average. Cumulatively, FIIs’ year-to-date net outflows have reached USD 27.8 billion—the highest on record. Hariselvan Radhakrishnan noted: 'Persistent foreign outflows, coupled with elevated borrowing costs, continue to weigh heavily on market sentiment—though the recent decline in crude oil prices has provided some temporary relief.' The Friday market closure meant investors could not adjust positions promptly following overnight risk events, thereby intensifying caution during Thursday’s session. Brent crude futures fell to around USD 97 per barrel on Thursday. Earlier, Iran announced it had received the U.S.’s response to its latest ceasefire proposal, while U.S. President Trump had publicly rejected the proposal just days prior.

Surging oil prices combined with rising expectations of a Federal Reserve interest-rate hike are pressuring both emerging-market equities and currencies.

India’s stock market posted its largest single-day decline in ten weeks, as new insurance commission regulations further weighed on the financial sector; meanwhile, a strengthening U.S. dollar pushed the emerging-market currency index toward its biggest one-day drop in six months. India’s equity markets suffered their most severe single-day selloff in ten weeks on Thursday. Soaring oil prices reignited inflation concerns, while broader emerging markets globally weakened amid heightened expectations of further U.S. Federal Reserve rate hikes and pressure from a strong dollar—significantly deteriorating investor sentiment. Domestically, India’s insurance regulator proposed new rules capping commissions, delivering another blow to the financial sector. The Nifty 50 index closed down 1.6% at 23,063.10, while the BSE Sensex declined 1.67% to 73,580.54—both registering their largest single-day drops since July 8. Brent crude rose 2.4% on the day to USD 105.60 per barrel, as U.S.-Iran diplomatic negotiations stalled, further boosting oil prices. Across broader emerging markets, the MSCI Emerging Markets Currency Index fell 0.45%, nearing its largest single-day decline since March 19, while the MSCI Emerging Markets Equity Index dropped 0.9%. The yield on 10-year U.S. Treasury notes surged to its highest level since 2007, and according to the CME FedWatch Tool, the probability of a Fed rate hike in October now stands near 70%. Oil price rebound plus geopolitical risks shake market confidence in India Crude oil prices rebounding above USD 105 per barrel pose renewed inflationary pressure on India—a country highly dependent on oil imports. Hemang Gor, Senior Derivatives & Technical Research Analyst at Axis Direct, remarked: 'Crude oil remains a key determinant for Indian markets. After briefly dipping below USD 100, oil prices surged back upward—reigniting supply-side concerns just as domestic markets had begun stabilizing.' He added that, technically speaking, as long as the Nifty remains below 23,500, the overall market bias remains bearish and cautious. All 16 major Indian industry sectors closed lower; small- and mid-cap stocks were no exception—small-caps fell 1.5%, while mid-caps plunged 2.3%. New insurance commission regulations hit the financial sector first and hardest Proposed reforms by India’s insurance regulator served as the immediate catalyst behind the financial sector’s sharp decline. The draft regulations center on three key provisions: imposing caps on commission payouts; linking commission levels to product complexity; and extending the payment period for life insurance commissions—from being paid entirely in the first year to being spread across subsequent years.

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