Market Performance Summary – September 2026
Overview:
- The Nifty 50 fell 6.06% to 22,620.45 and the BSE Sensex fell 5.82% to 72,480.29. It was the second straight monthly decline and the worst month since March.
- The Nifty closed below its 200-week moving average (around 22,600) for the first time since the Covid crash. The September derivatives series was the worst in 25 years.
- Unlike August, the broader market did not hold up:
- The Nifty Midcap 100 fell 7.6%, the worst of the major indices, ending its five-month winning streak.
- The Nifty Smallcap 100 fell 3.41% (the Smallcap 250 fell 3.1%).
- The Nifty 100 fell 5.92% and the Nifty 500 fell 5.9%.
What Changed?
- Five pressures came together: renewed West Asia escalation, a sharp rise in crude, higher US bond yields, a weaker rupee and FII selling. India VIX rose to 13.5 from 11.2.
- Brent ended September at $103.2 a barrel, up about 14% from $90.5 at the end of August. Prices were volatile through the US-Iran conflict, and Axis Securities flags a prolonged stay above $100–110 as a risk to earnings.
- US Fed: on September 16 it raised rates by 25 bps to 3.75–4.00%, its first hike since 2023. The US 10-year yield rose to about 5.2–5.3% from 4.75% in August, close to 19-year highs.
- India’s 10-year yield rose to 7.17% from 6.85%.
- RBI: there was no MPC meeting in September. The repo rate has been held at 5.25% four times in a row. The MPC meets October 5–7, and about 60% of economists in a Reuters poll expect a 25 bp hike.
- The case for a hike: Q1 FY27 GDP growth of 7.8%, August CPI at 4.82% with food inflation at 5.95%, strong credit growth and higher energy prices.
- August industrial production grew 8.0%.
Currency & Institutional Flows
- Rupee: it weakened to about 95.8 against the dollar at month-end from 95.2 at the end of August. It was the worst-performing major emerging-market currency over the period.
- FIIs were heavy net sellers in the cash market, with outflows of about ₹44,013 crore in September. That is roughly six times August’s ₹7,532 crore.
- FII outflows for FY27 so far are close to $10 billion.
- DIIs: they bought more aggressively, with net inflows of ₹76,030.3 crore
Sector Performance:
| Sector | Return | What Drove It? |
| Media | +1.66% | Best sector of the month and the only index to close higher; 13 of the 14 sectoral indices fell. |
| Pharma | –2.75% | Declined the least as investors moved into defensives; a weaker rupee (about 95.8 to the dollar) supports export earnings. |
| Metal | –3.22% | Held up relatively well while the Nifty fell 6%, helped by firm commodity prices; MCX gold rose about 7% and silver about 9%. |
| FMCG | –3.30% | Outperformed the Nifty as a defensive play, a sharp turnaround from August’s 6.27% fall. |
| Oil & Gas | –4.32% | Brent rose from $90.5 to $103.2 a barrel and crossed $100 for the first time since July as US–Iran tensions escalated. |
| Healthcare | –4.74% | Hospital stocks fell 5–7% after the Supreme Court criticised steep drug mark-ups and suggested a uniform 16% margin on all medicines. |
| Bank | –5.85% | Weighed down by FII net selling of ₹44,012.8 crore, rising bond yields and growing expectations of an RBI rate hike. |
| Financial Services | –6.25% | Hit by the insurance regulator’s proposed caps on distribution commissions and tighter curbs on retail speculative trading. |
| Auto | –8.83% | One of the month’s biggest underperformers, as elevated crude raised input-cost concerns and rate-hike expectations weighed on demand-sensitive sectors. |
| IT | –11.18% | Worst sector of the month, reversing August’s 1.59% gain. The US Fed’s first rate hike since 2023 and a US 10-year yield above 5.2% weighed on a sector that earns heavily from the US. |
Key Economic Highlights:
| Indicator | Latest Data | The Bottom Line |
| RBI Repo Rate (Upcoming: Oct 7) | 5.25% | Held four times in a row. About 60% of economists expect a 25 bp hike at this week’s MPC, given 7.8% Q1 GDP growth, 4.82% August CPI, crude above $100 and a weak rupee. |
| Manufacturing PMI (Sep) | 55.1 | Rebounded from August’s five-year low of 52.8 to the strongest reading since February. New orders grew at the fastest pace in seven months, and factory hiring resumed. |
| Services PMI (Sep, Flash) | 55.8 | Up from 54.1 in August. The flash composite PMI rose to 56.5, the fastest private-sector expansion since June. |
| Industrial Production (Aug) | 8.0% YoY | Up from 7.4% in July and well above the 6.5% consensus. Manufacturing grew 9.0% and capital goods 16.9%, while mining contracted 5.6%. |
| GST Collections (Sep) | ₹2.04 lakh cr | Up 14.7% YoY and above ₹2 lakh crore for a third straight month, with import revenue up 25.9%. |
| Forex Reserves (Sep 25) | $747.6 bn | Down $18.3 billion, a second sharp weekly fall, as the RBI sold dollars to defend the rupee. |
| US Nonfarm Payrolls (Sep) | +29,000 | Well below the roughly 90,000 expected, with unemployment up to 4.2%. Markets now price about an 85% chance the Fed holds rates in October after its September hike. |
Fundamental Outlook:
- Earnings: FY27 Nifty EPS growth is expected at around 15%, with estimates largely unchanged after Q1. Financials, IT, Oil & Gas and Telecom estimates have improved, while Auto, Industrials and Metals have seen cuts. Q2 margins will be important as higher input, energy and freight costs could weigh on profitability.
- Inflation and rates: August CPI rose to 4.82%, while food inflation reached 5.95%. Brent is above $100, increasing expectations of a 25 bps RBI rate hike. The 10 year yield has risen to 7.17%, which could limit valuation expansion.
- Oil and global factors: Brent rose 14% in September to $103.2. Sustained prices above $100 could lead to earnings downgrades, while a move below $85 would be positive. High US yields and FII selling remain a concern.
- Domestic economy: Q1 GDP grew 7.8%, IIP rose 8%, GST collections remained above ₹2 lakh crore and bank credit growth is around 18%. Strong DII flows and SIPs remain supportive.
- Markets: Nifty forward PE is now around 17x versus the long term average of 18.4x. However, weak market breadth and elevated mid and small cap valuations make stock selection important.
- Key monitorables: RBI policy, Q2 earnings, crude prices, FII flows, US yields and festive season demand.
Technical Outlook:
- Trend remains weak: Nifty closed at 22,555.75, ending a four session losing streak. The recovery was supported by global cues and softer crude, but Nifty remains below its 200 week moving average near 22,600 after eight weekly declines.
- Derivatives remain cautious: FIIs continue to hold heavy short positions, while October rollover was below average at 74.29%. The PCR at 0.68 also indicates that call writers remain dominant.
- Key levels: 22,600 to 22,700 is the immediate resistance. A sustained move above this can take Nifty towards 23,000 to 23,100. Supports remain at 22,300 and 22,200, while 21,800 to 22,000 is the stronger support zone.
- Volatility remains elevated: India VIX at 14.44 suggests wider swings. The RBI policy on October 7, September CPI and Q2 earnings are the key near term triggers.
US Market Outlook:
- Fed outlook has turned less hawkish: The Fed raised rates by 25 bps to 3.75–4.00% in September, but weak September payrolls. Markets are now pricing only around 18–22% probability of an October hike, while expectations for a December hike remain high.
- Earnings remain the key support: FactSet expects S&P 500 Q3 earnings growth of 29.5%, with revenue growth of 12.3%. This would mark the third consecutive quarter of more than 25% earnings growth, with all 11 sectors expected to report year on year earnings growth.
- Earnings guidance has turned unusually positive: 62% of the 116 S&P 500 companies that have issued Q3 guidance have given positive EPS guidance. This is well above the 5 year average of 40% and the highest level since FactSet began tracking this data in 2006, suggesting that companies are entering the earnings season with a strong base.
- Earnings expectations remain strong: Analysts expect 27.6% earnings growth in Q4 and 32.4% for CY2026. With earnings estimates continuing to move higher, strong corporate profit growth remains the main support for equities despite higher interest rates.
- Valuations have become slightly more reasonable: The S&P 500 is trading at around 19x forward earnings, below its 5 year average of 19.8x and broadly in line with the 10 year average of 19.1x. Earnings growth has helped absorb some of the valuation pressure, but the market still has limited room for earnings disappointments.
- Near term outlook remains cautious: The S&P 500 rose 0.7% on October 5 to 7,773.95, moving close to its record high despite the 10 year Treasury yield rising to around 5.31%. Brent crude also remains above $100, while geopolitical tensions continue. Strong earnings are helping the market absorb these pressures, but elevated bond yields and oil prices remain key risks to valuations.
Gold Outlook:
- Domestic prices remain elevated but have corrected: 24K gold is around ₹1,49,450/10g and silver around ₹2.26 lakh/kg, with gold about 9% below its late August peak. Recent correction has brought prices closer to more reasonable levels.
- Global gold remains under pressure: Spot gold is around $4,130/oz, after falling from above $4,400 earlier in September. A stronger dollar and higher US Treasury yields have driven the recent correction, although gold continues to hold at elevated levels.
- Long term outlook remains positive: Central bank buying continues to provide structural support, while festive demand from Dhanteras and Diwali should support physical gold demand in India. The recent correction is more a result of higher yields and a stronger dollar than a change in the longer term gold story.
Final View:
- The correction is largely global, not domestic: The September fall was driven by oil, geopolitics, US yields, rupee weakness and FII selling. Domestic growth, credit and tax collections remain healthy, so the correction looks more like a market repricing than a breakdown in fundamentals.
- Earnings will drive the next move: With less support from liquidity and policy, the next leg up will need to come from earnings. Q2 may be softer, so companies with better margins and guidance should outperform, leading to greater stock level divergence.
- Valuations have become more reasonable: Large cap valuations have corrected enough to limit downside. The broader market is still relatively expensive, so we would remain selective and focus on quality and earnings visibility.
- Oil remains the key swing factor: A sustained fall in crude would ease inflation, rupee and margin pressures and could trigger a recovery. A prolonged move above $100 would increase earnings risks.
- Our view: We remain constructive over the medium term, supported by domestic growth and capex. In the near term, volatility is likely to remain high. We prefer staggered buying on dips, with a focus on quality domestic businesses and selective exposure to the broader market.
Investors are advised to consult their financial advisors before making any investment decisions. This view does not constitute investment advice.
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