Markets Next Week: Crude oil at $117, broader market selloff and Q2 earnings in focus

Global market weakness, including a selloff in artificial intelligence (AI)-related stocks, also weighed on investor sentiment. Meanwhile, Brent crude prices breached $117 per barrel, keeping concerns over India's energy import bill and the potential impact on inflation and corporate margins in focus.

Gold and silver also came under selling pressure during the week, while bond yields eased but remained elevated. The Indian rupee stayed firm, trading just below the 95 mark against the US dollar after its recent sharp weakness, supported by measures taken by the Reserve Bank of India (RBI).

Looking ahead, investors will track developments in crude oil prices, foreign fund flows, global market cues and the ongoing Q2 earnings season, with several major companies scheduled to announce their results next week. Central bank decisions in the US, Europe and Japan will also be on the radar.

Crude oil remains a key concern

Gaurang Shah, Senior Vice-President at Geojit Investments, in an interaction with Business Today, said crude oil prices were a major source of selling pressure in the domestic equity market.

“I think the biggest pain in the market, if I have to possibly zero down on one element that is creating selling-side pressure from higher levels and preventing the market from sustaining those levels, is crude oil. High crude oil prices open up a can of worries for the Indian economy because of its dependency on imports for energy requirements,” Gaurang Shah said.

“It is good to see that the rupee has strengthened from around 97 to close to 95 level, thanks to the intervention by the RBI. FIIs have been relentlessly selling, and I think now the selling pressure is extending to the midcap and smallcap segments. From Monday onwards, we've seen a lot of selling pressure in the broader markets, and that's one of the primary reasons why we have seen that kind of correction in both midcap and smallcap stocks,” Shah added.

Shah advised investors to avoid tracking their equity investments on a daily basis and focus on their investment objectives.

“I have always maintained one thing: when you invest in the equity market, don't try to track your investments on a day-to-day basis because, if you do that, your blood pressure is going to fluctuate. That situation may possibly compel you to take certain unwarranted decisions, and you might end up selling investments in fundamentally strong companies,” Shah said.

“Continue your investments via SIPs or lump-sum investments. If you are able to understand the equity markets, direct investment is also an option, but make sure that you do your homework before committing to a particular investment idea, theme or platform. Anything and everything that you touch in the equity market is not going to turn into gold. So, it's very prudent that you do a little bit of homework. Ask questions before investing. Don't ask questions after investing,” Shah said.

“I'm not against FDs. I have a small amount of my own personal money in FDs as well. But keep your investments in the equity market. These are the markets that give you opportunities to create portfolios and build wealth.”

IT stocks show relative resilience

While most sectors ended the week in the red, IT stocks bucked the broader trend. Nifty IT gained 0.5%, making it the only sectoral index among the listed top performers to end higher.

Shah said Geojit Investments had maintained a positive view on the IT sector despite concerns over the impact of AI. “As a brokerage house, we've been positive even when a lot of players in the Indian equity market advised investors to stay away from the IT sector. We maintained a positive stance. It is going to be relevant over a longer period of time. Human intervention is going to be necessary,” Shah said.

“We are right now talking about only AI. Super AI is something that we need to be very careful of because that’s going to be even more destructive if it is not put in the right perspective.”

“Having said that, don’t expect the returns that you were getting in earlier years. You will get a decent return, but it won’t be something like what you used to get five or 10 years back. And along with that, you need to be very careful about where you are investing in the IT sector. So, keep this thing in mind and have a reasonable return expectation. You will definitely make money in Indian IT companies as well,” Shah added.

Ajit Mishra, SVP (Research) at Religare Broking, also highlighted the relative resilience of IT counters.

“On the sectoral front, IT stocks demonstrated relative resilience, supported by earnings-related optimism and buying interest in select technology heavyweights. However, weakness across most other sectors weighed on overall sentiment, with metal, realty and energy emerging among the major laggards. The sharp underperformance of midcap and smallcap stocks further highlighted heightened risk aversion and persistent selling pressure beyond frontline stocks,” Mishra said.

Mishra added, “Among the key concerns, Brent crude stayed elevated amid escalating tensions in the Middle East. For India, persistently high crude prices pose risks to imported inflation, corporate margins and currency stability. Continued foreign fund outflows and uncertainty across global markets further dampened risk appetite, adding to the challenges facing domestic equities.”

Nifty technical levels to watch

After four consecutive sessions of decline, Mishra noted that Nifty had approached its key support zone of 22,200–22,400.

“A decisive break down below this range could open the door to further downside towards 21,700. Conversely, a sustained recovery above 22,900 could revive hopes of a rebound, potentially paving the way towards 23,300. Meanwhile, continued weakness in midcap and smallcap stocks is likely to keep market participants on their toes. We thus recommend traders maintain a cautious stance and prioritise disciplined risk management. Long-term investors, however, may selectively accumulate quality large-cap stocks in a staggered manner, keeping a medium- to long-term investment horizon,” he further said.

Sectoral indices: IPO, chemical and defence stocks lead losses

Nifty IPO was the worst-performing index among the listed indices, declining 7.5% during the week, even as the Reliance Industries Ltd (RIL)-backed Jio Platforms IPO, India's largest-ever public issue, receiving 21.58 times subscription on Friday.

Nifty Chemical fell 7.2%, while Nifty Defence dropped 7.1%. Nifty Consumer Durables declined 6.4%, followed by Nifty Metal, which lost 5.4%, and Nifty Realty, which fell 5%. On the other hand, Nifty IT gained 0.5%.

Among Nifty50 constituents, Adani Enterprises and Shriram Finance fell 8% each, while Trent declined 7.8%. Tata Motors Passenger Vehicles (TMPV) dropped 7.9% and Nestle India lost 7.1%.

HCL Technologies led the Nifty50 gainers, rising 3%, followed by Tata Consultancy Services (TCS), which gained 2.7%. ONGC advanced 2.5%, UltraTech Cement rose 1.3% and Cipla gained 1%.

In the NSE 500 universe, International Gemological Institute Ltd (IGIL) surged 17%, followed by Tata Teleservices (Maharashtra) Ltd (TTML), which gained 12.3%. Ipca Laboratories advanced 7%, LTTS climbed 5.5%, and Chennai Petroleum Corporation Ltd (CPCL) gained 4.9%.

On the losing side, Himadri Speciality Chemical Ltd (HSCL) and Swiggy declined 25% each, while Jindal SAW tumbled 23%. Finolex Cables dropped 20%, and KEI Industries lost 17%.

FIIs in see-saw mode; DIIs continue to support

Foreign institutional investors (FIIs) remained in a see-saw mode during the holiday-truncated week, buying equities in two sessions and selling in the other two select sessions. FIIs sold Indian equities worth around Rs 4,606 crore on October 19 and October 22, while purchasing equities worth about Rs 1,909 crore on October 21 and October 23.

Domestic institutional investors (DIIs), meanwhile, bought equities worth around Rs 10,941 crore during the week, providing support to the domestic market amid fluctuating FII flows.

Q2 earnings: Key stocks to watch next week

The upcoming week will be a busy one for corporate earnings, with several major companies scheduled to announce their September-quarter (Q2 FY27) results.

October 26: Paytm, REC, Tata Consumer Products, Bank of Maharashtra and Ather Energy.

October 27: Larsen & Toubro (L&T), Maruti Suzuki India, Bajaj Auto, Tata Steel and Cipla.

October 28: Hindustan Unilever Ltd (HUL), Adani Ports and Special Economic Zone, Adani Enterprises, TVS Motor Company, Hyundai Motor India and Hero MotoCorp.

October 29: Asian Paints, Trent, Laurus Labs, Ambuja Cements and Suzlon Energy.

October 30: Sun Pharmaceutical Industries, Bharat Electronics (BEL), Indian Oil Corporation (IOC), Bank of Baroda and GAIL India.

Global events to watch

Apart from corporate earnings, investors will track key central bank meetings scheduled for next week.

US Federal Reserve: The Federal Open Market Committee's rate decision is scheduled for October 28.

European Central Bank: The ECB's rate decision is scheduled for October 29.

Bank of Japan: The central bank's policy meeting is scheduled for October 30.

Developments in West Asia, movements in crude oil prices, foreign fund flows and global technology stocks will also remain important factors to watch out for domestic equities.