The Indian stock market has set a record, but a record that investors did not expect. Dalal Street has seen eight consecutive weeks of decline, the first time in 25 years. This decline is greater than that seen during the 2020 Covid-19 crash and the 2008 global financial crisis. Rising oil prices, rising bond yields and inflation worries dampened market sentiment, leading to a massive sell-off in Indian equities. Let us also tell you what are the 5 reasons why stocks may fluctuate in the coming week.

Oil prices

Oil prices remained slightly lower this week as European leaders agreed to U.S. President Donald Trump’s call to release diesel reserves to lower fuel prices and cut fuel imports from the United States. But analysts are still concerned. “We don’t know how to model the end of this scenario,” said a JP Morgan analyst.

He stressed that uncertainty remains as to how the conflict will progress. When the conflict began, the bank admitted that there were certain economic limits that the US administration would not cross. Six months into the war, JP Morgan said many of those limits had been crossed, while there was still no clear exit strategy.

Oil prices are also likely to rise due to the risk of further supply disruptions. Dan Struven, co-head of global commodity research at Goldman Sachs, said the latest attacks show that shipping disruptions can spread and become more severe. Goldman Sachs has predicted a scenario in which oil prices could rise to $120 per barrel if attacks on ships in the Middle East increase. If exports normalize, the bank expects oil prices to return to the level of $80 per barrel.

Bond yield

The 10-year US Treasury yield, which measures borrowing costs and asset prices around the world, rose to 5.34 percent. This is its highest level since 2002. A sharp rise in the 10-year US Treasury yield could pressure Indian stocks as it makes US government bonds more attractive than riskier emerging market assets. A rise in US yields could prompt global investors to pull money out of markets such as India, putting pressure on the rupee and equities. A weaker rupee could further increase the cost of imports, especially for companies that depend on crude oil and other foreign inputs.

FII selling increased further

In just six trading sessions, FIIs raised Rs. 43,687 crore and this sell off has intensified in the last three sessions. Their index futures long-short ratio fell to 8.01 percent, near the low of their historical range. Foreign sales make sense in the current global interest rate environment. With the 10-year US bond yield hovering around 5.2%, this selling by FIIs is a logical move, experts say.

Even after the AI ​​trade peaks, foreign investors are unlikely to return to Indian equities in large numbers. Bernstein said in a report that continued improvement in foreign investment depends on how well India is able to build globally competitive industries in areas such as semiconductors, batteries and energy storage.

Q2 earnings

TCS and DMart are among the 21 companies that will announce their Q2 earnings, officially kicking off the earnings season. This can provide an important indication of market sentiment, especially when investors are looking for signs of strength in corporate earnings amid a volatile global environment. TCS’s results will focus on management comments on revenue growth, deal wins, margins and IT spending, while DMart’s data will provide information on customer demand, sales growth and operating margins. If either outcome differs more than expected, the market mood could change not only for the respective stocks but also for the IT and consumer sector as a whole.

A fall in the rupee

The Indian rupee hit a two-month low due to a sharp rise in global bond yields and higher oil prices. The currency was already under pressure to withdraw money from foreign portfolios. Due to continued pressure on the rupee, exporters are cautious about hedging their procurement, while importers’ hedging is strong. Due to this, the gap between demand and supply in the foreign exchange market has widened. According to a Reuters report, FX advisory firm IFA Global advises exporters to hedge cautiously and only against orders in hand, while importers should use the decline in the dollar-rupee pair to hedge their exposure.