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Global headwinds forced extreme selling in Indian equities

ICICIdirect Research 09 Oct 2026 DISCLAIMER

The equity benchmark staged a rebound in the fag end of the week, snapping an eight-week losing streak and concluding the volatile week at 22,520, marking a modest gain of 0.5%. The broader market followed suit, with small caps gaining 0.75%.
Sectorally, the financial sector rallied post the RBI's policy announcement, while IT saw a notable rebound driven by TCS's earnings kickoff. Conversely, cyclicals like metals, realty, and auto continued to face pressure, undergoing extended corrections.
Moreover, with current 10% correction seen over the past nine weeks, Nifty index has approached the April 26 low (22182). Meanwhile, the Nifty Next 50 Index remains 13% above the April lows, highlighting relative strength. This suggests that during the next phase of upward movement, these higher-quality stocks are likely to lead the charge.
Elevated global yields—with the U.S. 10-year Treasury yield scaling multi-year highs—have altered the risk-reward equation for foreign capital, diverting institutional liquidity away from emerging markets like India and intensifying depreciation pressures on the rupee. Moreover, persistent volatility in global energy prices has compounded anxieties.  
Foreign Institutional Investors (FIIs) intensified their sell-off across as September progressed, culminating in a steep net outflow of nearly ₹36k crore.  Heavyweight sectors like Financial Services faced the most intense selling with over ₹13k crore. Other major sectors witnessing relentless selling included Oil & Gas (-₹7k crore), Automobile and Auto Components (-₹6k crore) and Telecommunication (-₹3.5k crore).  
However, in the October month, the intense capital flight has spilled over the broader markets. Foreign portfolio investors continue to pull out capital at an accelerated pace, driven primarily by tightening global financial conditions. In Just 6 trading sessions of October so far, FIIs have pulled over ~35k crores from Indian equities as Nifty almost retested its March lows.
FIIs remained significantly negative in through derivatives positioning as well where their net shorts remained elevated around 3 lakh contracts.
From the index perspective, we believe a recovery beyond 23800 should be considered as a first sign of improved sentiments and we expect BFSI space to take the lead. Strong supports at placed at the April 25 lows of ~21,700.

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