The week in markets as foreign outflows test domestic benchmarks

Indian financial markets experienced continued pressure during the week ending 4 October 2026, marked by sustained foreign capital outflows, technical declines in headline indices, and central bank action to support the rupee. Alongside these macroeconomic developments, market regulators moved closer to finalising structural updates to trading and commodity frameworks.

Foreign portfolio investors withdrew over ₹35,000 crore in September

Foreign portfolio investors (FPIs) sold ₹35,860 crore worth of Indian equities in September, reversing the net purchases recorded in the prior month. The sustained selling occurred despite recent regulatory initiatives from the Securities and Exchange Board of India (SEBI) to simplify access for overseas investors.

Overseas fund flows remain heavily influenced by global macroeconomic conditions and relative investment returns across international markets, meaning domestic administrative reforms alone do not guarantee foreign capital inflows.

Source: Mint

Foreign exchange reserves declined to $747.56 billion

India’s foreign exchange reserves fell by $18.34 billion to $747.56 billion for the week ended 25 September, marking the third consecutive weekly contraction. Over a three-week span, foreign currency assets dropped by $38.15 billion from their record high of $785.71 billion reached on 4 September.

The reserve buffer decreases when the Reserve Bank of India (RBI) sells foreign currency to smooth exchange rate volatility and counter sharp depreciation pressures on the Indian rupee.

Source: Economic Times

RBI Governor addressed equity market corrections

RBI Governor Sanjay Malhotra stated that while domestic equity markets have pulled back from recent peaks, the downward adjustment has remained orderly and smooth. The Governor also noted that ongoing corrections in global artificial intelligence shares present both market risks and potential comparative benefits for Indian assets.

Central banks monitor domestic stock valuations closely because sharp declines can affect broader financial stability, balance sheets, and foreign investor sentiment.

Source: Mint

Nifty breached its 200-week moving average

The Nifty index dropped below its 200-week moving average, located at 22,606.97, ending the week around 22,422. This marks the first time since March 2020 that the benchmark index has slipped below this long-term trend indicator, following eight consecutive weeks of market declines.

Long-term moving averages reflect multi-year price averages and are watched by analysts to assess broad market momentum, though temporary breaches carry inherent short-term volatility.

Source: Economic Times

SEBI reviewed feedback on Closing Auction Session rules

SEBI received over 3,500 public comments on its consultation paper reviewing Closing Auction Session (CAS) mechanisms, market timings, and derivatives settlement methodologies. SEBI Chairman Tuhin Kanta Pandey indicated that a regulatory framework and circular addressing these rules will be issued soon.

The closing auction determines official closing prices across the cash and derivatives segments, making the calculation methodology vital for price discovery and fair settlement.

Source: Mint

Bond markets evaluated potential policy rate adjustments

Indian debt market participants focused on rising inflation risks driven by higher food and oil costs. Market projections suggested the central bank may consider raising the benchmark repo rate—the rate at which commercial banks borrow from the RBI—by 50 to 75 basis points in upcoming meetings.

Bond prices move inversely to interest rates, meaning anticipated increases in policy rates can raise yields and affect valuation across fixed-income instruments.

Source: Mint

Large-cap and smaller-cap segments showed contrasting participation

A report by Kotak Institutional Equities highlighted investor apathy towards large-capitalisation shares despite moderated valuations, even as retail activity remained elevated in mid- and small-cap segments. Large caps experienced selling linked to geopolitical tensions in West Asia and broader market corrections.

Divergences in trading interest show how different market tiers react to external risks, with smaller companies carrying heightened sensitivity to shifting liquidity.

Source: Economic Times

Over half of mid-to-large companies recorded negative returns in 2026

More than 50% of Indian mid-to-large-tier listed businesses with a market capitalisation exceeding ₹1,000 crore have seen share values fall in 2026. The widespread erosion in value has been attributed to elevated borrowing costs, margin pressures, and regulatory actions across specific sectors.

Headline indices can sometimes obscure broader weakness across intermediate-tier businesses, where underlying earnings and operational expenses have faced structural hurdles.

Source: Economic Times

Primary market activity eased after a record September

The primary public equity market is slated for a quiet week of new offerings after companies raised approximately ₹39,000 crore via Initial Public Offerings (IPOs) during September. However, 29 previously closed issues are scheduled to commence trading on stock exchanges in the coming days.

IPO activity relies heavily on prevailing secondary market sentiment and liquidity, often seeing cyclical pauses after dense clusters of capital fundraising.

Source: Economic Times

SEBI assessed position limits in non-agricultural commodities

SEBI is reviewing position limits for non-agricultural commodity contracts to enhance trading liquidity and market depth. In addition, the regulator discussed phased physical settlement for agricultural contracts and expanded investor outreach through its Project Jagrook initiative.

Position limits define the maximum contract volume a single entity can hold, a tool designed to prevent excessive price manipulation while allowing sufficient participation.

Source: Economic Times

Market updates over five trading sessions reflect temporary adjustments, liquidity flows, and evolving economic data. For individuals investing towards specific goals over five, ten, or twenty years, a single week of price volatility provides context on current conditions, but it does not determine long-term financial outcomes.