5 Key Factors That Could Change the Direction of the Stock Market – A Must-Read Before You Invest
The Indian stock market experienced significant pressure throughout the past week. Due to global tensions and ambiguous signals from international markets, indices fell by over 1%. After a slow start, growing uncertainty led to a downward trend in key benchmarks. By the end of the week, both the Nifty and Sensex closed near their weekly lows — the NSE Nifty settled at 24,718, while the BSE Sensex ended at 81,118.
Investor sentiment has been weakened by rising crude oil import costs and persistent global uncertainties. Foreign Institutional Investors (FIIs) continued to sell off their holdings, leading to notable market declines. Rising US bond yields and a strengthening US Dollar Index have further driven FIIs to pull back from Indian markets — a major factor in the recent market correction.
Here are five critical factors that could influence the stock market in the coming week:
1. Federal Reserve Meeting
The US Federal Reserve’s upcoming meeting will be closely watched by investors around the world. Given the mixed economic data released recently, there is widespread curiosity about when and how much the Fed might cut interest rates. Any statement or decision from the Fed could significantly sway global markets, including India.
2. Iran-Israel Tension
Geopolitical tensions between Israel and Iran remain high, and global investors are keeping a close eye on developments. Any escalation could disrupt global trade routes and impact commodities, especially crude oil, which in turn would affect global equity markets.
3. FII Activity
The buying and selling patterns of Foreign Institutional Investors will continue to be a critical factor for the Indian stock market. In last Friday’s session, FIIs sold equities worth ₹1,233.47 crore, while Domestic Institutional Investors (DIIs) showed more confidence, purchasing stocks worth ₹2,906.13 crore. These inflow-outflow dynamics can significantly impact market sentiment and direction.
4. Crude Oil Prices
Crude oil prices surged over 10% amid the growing tensions between Iran and Israel, reaching $76 per barrel — the highest in the past two months. This jump marks one of the biggest single-day spikes in the last five years. The concerns about supply disruptions through the vital Strait of Hormuz trade route are adding to the pressure.
According to Rahul Kalantri, Vice President of Commodities at Mehta Equities, the recent spike is also attributed to a larger-than-expected drop in US crude oil reserves, indicating strong demand. Furthermore, soft US inflation numbers have raised expectations of a rate cut by the Fed in September, which could further fuel oil demand going forward.
5. Rupee Depreciation
The Indian Rupee weakened by 0.52%, falling below 86.05 against the US Dollar. This decline was driven by a stronger US Dollar and heightened investor risk aversion following Israel’s pre-emptive strike on Iran. With tensions rising in the Middle East and crude prices climbing (WTI crude rose by 9% to exceed $74 per barrel), additional pressure is building on the Rupee.
Jatin Trivedi, Vice President – Commodities & Currency at LKP Securities, mentioned that the Rupee may experience significant fluctuations in the coming days. He predicted that the exchange rate could hover between ₹85.60 and ₹86.50 against the US Dollar in the near term.
Final Thoughts:
Investors should remain cautious and well-informed as these factors unfold. Volatility is likely to remain high, and any change in global or domestic dynamics — such as geopolitical developments, crude oil movement, or monetary policy shifts — could directly impact market performance. Diversifying investments and monitoring key indicators will be essential in navigating this uncertain phase in the stock market.