Stock market outlook: Crude oil prices, US Fed's policy decision among key factors to watch out for this week

Indian benchmark indices are set to move taking cues from a host of factors in this holiday truncated week. Crude oil prices will dictate the movement of market this week as US and Iran trade attacks on each other. Oil prices rose over 3% to $103 per barrel today after Iran-backed rebels struck a key pipeline in Saudi Arabia. Its impact was not felt since Indian equity market is closed on account of Ganesh Chaturthi today. 

Financial institutions such as Goldman Sachs and JP Morgan expect US Federal Reserve to implement a 25-basis-point interest rate hike at the September 15–16 FOMC policy meeting, bringing the target federal funds rate range to 3.75%–4.0%.

In the past week, Indian market ended lower for the fifth straight week. The market sentiment was impacted by elevated crude oil prices, rising global bond yields and concerns over US inflation. 

On Friday, Sensex fell 120.83 points or 0.16 per cent to 74,781.76, while the NSE Nifty index declined 79.70 points or 0.34 per cent to 23,398.10. Sensex recovered 621.6 points from its intraday low of 74,160.16, while Nifty bounced back 166.7 points from a low of 23,231.40.

Commenting on the outlook of market this week, Ajit Mishra, SVP, Research at Religare Broking said, "The market enters the week with a cautious bias, as crude oil prices, geopolitical developments and the US Federal Reserve’s policy outlook remain key determinants of near-term direction. A sustained rise in crude oil prices could further pressure inflation expectations, the rupee and corporate margins, while a hawkish Fed stance could weigh on foreign flows and emerging-market sentiment.

Investors should adopt a selective and measured approach, focusing on companies with strong balance sheets, resilient earnings visibility and lower sensitivity to crude oil prices and global demand. Fresh positions should be staggered, with greater emphasis on risk management until the external environment stabilises."

Mentioning the technical outlook of the market, Sudeep Shah, Vice President- Technical and Derivatives Research at SBI Securities said, "Momentum indicators further reinforce the bearish bias. Both the daily and weekly RSI remain in negative territory and continue to trend lower, while the daily MACD maintains a bearish stance, with its histogram staying below the zero line for the past 21 trading sessions. Looking ahead, the 75500-75600 zone is likely to act as a significant resistance area. As long as the index trades below 75600, the bearish trend is likely to remain intact, with potential declines towards 74000 and subsequently 73400 in the near term."

Vinod Nair, Head of Research, Geojit Investments said, "The coming week brings a dense macro calendar with key releases like the US and domestic inflation prints and policy decisions from both the Fed and the BoJ, which, alongside the trajectory of crude, will set near-term direction. Elevated energy prices sustained foreign outflows and geopolitical uncertainty will keep volatility high. However, resilient domestic fundamentals and strong institutional support could continue to attract buying at lower levels and contain the downside. The near-term task is to book partial profits where valuations are stretched and systematic risk exposure is highest and redeploy into defensive and deep-value segments."