Asian markets witnessed broad-based selling on Monday, with Japan and Taiwan benchmark Indices falling nearly 2% amid concerns over expensive artificial intelligence (AI) valuations and funding. Sentiment weakened after Wall Street ended lower on Friday as the sell-off in technology and semiconductor stocks deepened, raising concerns over the sustainability of the global AI rally.
At 8:18 am IST, Japan’s Nikkei 225 was down 1.17%, while Taiwan’s Weighted Index fell 1.75%. Indonesia’s Jakarta Composite was the worst performer in the region, plunging 5.24% and extending Friday’s sell-off after MSCI warned that it could remove Indonesia from its global indexes in 2027 over concerns about market transparency and ownership data.
China’s Shanghai Composite bucked the regional trend, rising 7.82 points, or 0.21%. Meanwhile, Singapore’s Straits Times Index and South Korea’s KOSPI slipped 0.03% and 0.08%, respectively.
The weak regional cues could weigh on Indian equities, which are also contending with elevated crude oil prices and geopolitical uncertainty. At the time of reporting, GIFT Nifty was trading at 23,125, up 30.50 points, or 0.13%, indicating a largely flat start for domestic benchmarks today.
Despite global headwinds, domestic benchmarks ended last week on a strong note. The Sensex surged 3.11% to 74,729.27, while the Nifty advanced 2.78% to 23,146.15.
Ponmudi R, CEO of Enrich Money, said Indian markets were likely to remain cautious as persistently high crude oil prices and geopolitical risks kept macroeconomic concerns in focus.
Crude oil, geopolitics remain key risks
Developments around the Strait of Hormuz will remain crucial for energy markets. Iran has reiterated that the strategic waterway could reopen within six days if the US accepts its conditions, which include demands relating to the US blockade, sanctions and a broader cessation of hostilities. However, the absence of an agreement continues to cloud the outlook for shipping flows and energy supplies.
During Asian trading hours, WTI crude was trading at around $97–$98 a barrel, while Brent remained above $108, raising concerns over imported inflation, the rupee and corporate profitability.
A diplomatic breakthrough in US-Iran talks could ease crude prices and support market sentiment, while a prolonged disruption or further escalation could intensify volatility across global markets.
Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, said Indian equities were likely to open cautiously around the flat line. While Brent crude had eased from $110 to around $108 a barrel and the US 10-year Treasury yield had declined, these moves might not be sufficient to trigger a broader risk-on rally unless the easing in external pressures was sustained.
FII flows remain a concern
Foreign institutional investors (FIIs) remain another key variable. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said FIIs sold equities worth ₹54,636 crore through October 16, exceeding their total selling in September. However, the pace of selling moderated in recent sessions, with FIIs turning marginal buyers on October 16.
Vijayakumar attributed the temporary change in sentiment partly to the decline in US Treasury yields and the rupee strengthening to below 95 against the dollar. He cautioned that the shift in FII activity could be tactical rather than structural.
Nifty shows signs of a recovery
Pabitro Mukherjee, Deputy Vice President–Research at Bajaj Broking, said the Nifty had rallied more than 950 points in two weeks, marking its strongest pullback since the August 2026 peak of 24,774.
The formation of a strong bullish weekly candle, with a higher high and a higher low for the first time in nine weeks, alongside a close above the previous breakdown zone of 23,070, signals a possible pause in the two-month corrective phase and improving price momentum.
However, the sustainability of the recovery will depend on whether the index can hold these gains amid volatile global markets, elevated crude prices and continued foreign fund outflows.
Earnings and economic data in focus
Corporate earnings and domestic economic indicators will remain important drivers of stock-specific action. Investors will assess results from Axis Bank, HDFC Bank, ICICI Bank, IDBI Bank and Yes Bank, alongside earnings from Bajaj Finance, Eternal, Swiggy, Dr Reddy’s Laboratories, Infosys and Tata Motors.
September infrastructure output and the HSBC Flash Composite Purchasing Managers’ Index (PMI), including its manufacturing and services sub-indices, will provide further clues about the pace of domestic economic activity.
Ajit Mishra, SVP–Research at Religare Broking, said elevated crude prices, rising retail and wholesale inflation, mixed global cues and persistent foreign fund outflows remained key concerns despite the recent recovery. He cautioned that the relatively muted performance of midcap and smallcap indices meant the benchmark rally should not be interpreted as confirmation of a broad-based market recovery.
The direction of crude oil prices, US Treasury yields and FII flows will remain critical in determining whether the recent rebound can extend or renewed global uncertainty triggers fresh selling pressure.
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