Indian bluechips rally as oil surges, foreign investors turn sellers
Indian benchmark indices ended a volatile week higher, driven by a rotation into large-cap stocks, but face headwinds from surging crude oil prices and foreign fund outflows.
The Sensex rose 0.75% and the Nifty 50 settled at 24,334 last week, extending gains as investors shifted away from richly valued broader markets toward bluechip stocks. Heavyweights including Reliance Industries, ICICI Bank, and HDFC Bank advanced 1% to 4%.
IT stocks like Infosys and TCS led the sectoral gains, effectively shielding the local market from a global tech selloff. The Philadelphia SE Semiconductor Index fell more than 20% from its June record high into bear market territory, pulling the Nasdaq down 2.9% for the week. Japan's Nikkei entered correction territory, while South Korea's Kospi remained in a bear market.
Analysts attributed India's resilience to a lack of exposure to the artificial intelligence trade that has driven stretched valuations elsewhere. The local market's primary macro overhang is instead the escalating conflict between the US and Iran. US strikes on Iranian infrastructure and reciprocal attacks have disrupted the Strait of Hormuz, a conduit for roughly 20% of global oil supplies.
Brent crude surged 5% to $88.10 and WTI gained 4% to $82.49, posting weekly gains of around 16%. The oil spike battered the Indian rupee, which posted its steepest weekly drop since May to settle at 96.28 against the dollar. "The broader bias for the rupee remains weak as elevated crude oil prices and cautious foreign fund flows continue to weigh on sentiment," said Jateen Trivedi, VP Research Analyst at LKP Securities.
Foreign institutional investors mirrored that caution, pulling Rs 8,743.35 crore from Indian equities. Domestic institutional investors absorbed the selling, injecting Rs 8,790.75 crore to support the market.
Focus now shifts to the first-quarter earnings season, with reports due from Infosys, IndusInd Bank, UltraTech Cement, Bajaj Auto, and Bank of Baroda. "Despite concerns over escalating tensions in West Asia, which pushed crude oil prices above $85 a barrel and pressured the rupee, market sentiment remained supported by encouraging Q1 FY27 business updates and growing confidence in a healthy earnings season," said Geojit’s Nair.
Technically, the Nifty maintains a bullish crossover in its relative strength index. "In the near term, the index is likely to remain firm, with the potential to move towards 24,800. On the downside, immediate support is placed at 24,200," noted Rupak De, Senior Technical Analyst at LKP Securities.
