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Informist, Tuesday, Sept. 8, 2026

 

By Eshitva Prakash

 

MUMBAI – The Nifty 50 is expected to be range-bound in September as market bets continue to be driven more by near-term challenges from high global bond yields and crude oil prices than by India's economic and earnings growth. Stubbornly high crude oil prices have made a decline in the headline index more likely than a bull run, analysts said.

 

The Nifty 50 will find it difficult to rise beyond 24300 points even if market sentiment improves, according to the median of estimates from 10 brokerages polled by Informist. Tuesday, the Nifty 50 ended at 23635.10 points. Options and technical data both point to strong resistance at 24000 points, which will limit upside.

 

The median of support levels suggests the Nifty 50 index will likely find support at 23700 points and then at 23550 points. The large open interest build-up at strike prices around spot levels in the Nifty 50 options indicates a range-bound movement throughout September.

Concerns about a slowdown in credit growth will keep large-cap bank stocks under pressure, and lower discretionary spending worries will hit information technology stocks in September, analysts said. Banks and IT stocks collectively account for around 45% of the Nifty 50's weight.

 

Weak fast-moving consumer goods stocks are also likely to put pressure on the Nifty 50 this month, analysts said. Higher crude oil prices and rising inflation are likely to limit the sales growth and profitability of these companies in the near term, analysts said. A weak monsoon will also hit demand for FMCG products at a time when these companies are already dealing with high inventory costs and a downturn in demand due to recent price increases to pass on rising input costs.

 

"FMCG multiples have degraded quite a bit, and if the interest rates are high for some more time, there is a possibility that the market might re-evaluate their multiples again," George Thomas, fund manager – equity of Quantum Asset Management Co. Pvt. Ltd. said. "Some of the names could be attractive, but ostensibly they have not reached that point as yet," he added.

 

Analysts noted markets present select pockets of strength, driven by resilient earnings growth, especially in the consumer discretionary sector. However, several companies have guided for a drop in volume and a compression in profitability for the September quarter, which has done little to help near-term sentiment. Expectations of a weak monsoon will also weigh on rural demand.

 

The India Meteorological Department expects the prevailing El Nino conditions will get stronger in the remaining days of this year's southwest monsoon season, with rainfall in September expected to be below normal at 91% or less of the long-period average. A weak monsoon will push up prices further and lead to downtrading in consumer products, analysts said.

 

OIL TROUBLES
Analysts unanimously agree that crude oil prices will determine the market's direction in the short term. The US-Iran war, which looked like it was headed toward an end in early August, flared up again, causing a spike in crude oil prices and bond yields and reigniting fears of high inflation.

 

"Markets are tightening and tightening markets only resolve in one direction. So if oil refuses to come down, then there is an even bigger tailwind for (bond) yields to march higher from already higher levels that we are currently seeing," Akshay Chinchalkar, managing partner and head of markets strategy at The Wealth Company, said.

 

Chinchalkar said oil prices look sticky at higher levels and that "this (rise in oil prices) seems to be more gradual, and the problem with gradual trends is that they tend to last a long time."

 

Market participants are concerned that a sharp rise in input costs will affect companies' bottom-line growth in the September quarter. "In the very near term, we would see some bit of market compression because companies would have to buy (raw materials) at higher prices," the head of equity research from a domestic brokerage said.

 

Several consumer-facing companies have taken, or plan to take, price hikes to limit the impact of a surge in crude-linked commodity prices. However, these hikes will take time to transmit to consumers and will keep profitability under pressure, Thomas from Quantum Asset Management said.

 

Tuesday, Brent crude oil futures rose to a high of $99.46 per barrel on the Intercontinental Exchange, nearly 19% higher from Aug. 3. The resumption of attacks by the US on Iran in August invited retaliatory strikes and further tightened Iran's grip on the Strait of Hormuz.

 

BOND SELL-OFF, FII FLIGHT

A sharp rise in oil prices has led to a widespread sell-off of government securities, with yields on government bonds touching multi-year highs in Japan and the US. Yields move inversely to bond prices.

 

US yields staying above 4.5% will hurt emerging market flows and dampen participation from foreign institutional investors, Thomas said. "With zero currency risk, why would any investor who has the mandate to invest anywhere in the world step out if he's getting (around) 5% (returns) in the US?" Chinchalkar asked.

 

The US 10-year bond yield rising above 5% will be the obvious trigger for a stock market correction, Christopher Wood, global head of equity strategy at Jefferies, said in his weekly note to investors, GREED & fear, according to media reports.

 

While analysts were unsure that FIIs would return to Indian markets, they acknowledged that FII selling has moderated, partly due to healthy June quarter earnings and the anti-artificial intelligence trade. "From an earnings flow perspective or a valuation perspective, there is nothing to complain about for FIIs," an analyst said. Some outflows from countries over-indexed in computer memory and AI stocks are likely to help the domestic market, the analyst said.

 

Net foreign investments in Indian equities rose to a two-year high of INR 296 billion in August, higher than INR 200 billion in July, and marked the second consecutive month of positive foreign flows. Financial services, automobile, auto components, and consumer services stocks got the most inflows, according to data from the National Securities and Depositories Ltd. Signs of earnings recovery, a stabilising rupee, and reasonable valuations after the recent correction makes India a preferred destination for global investors looking to diversify from the artificial intelligence stocks which have run up quite a bit, analysts said. Foreign investors have been net sellers of Indian equities so far in 2026 and have net sold more than INR 2.38 trillion worth of equities, NSDL data showed.

 

RATE HIKE WORRIES

"The risk (from high bond yields) now is, what if we're at the cusp of a coordinated fight against inflation from the developed world," Chinchalkar said, noting a record surge in yields across the US, Japan, and Australia. Chinchalkar is convinced that the US Federal Reserve will hike interest rates at the US Federal Open Market Committee meeting later this month, unless the consumer price index shows significantly lower-than-expected inflation.

 

"The higher (US) yields may remain for some time, and even the fiscal deficit is on an elevated base... so higher rates look to be a reality in the near term," an analyst said, adding that a US rate hike could negatively affect some high-flying Indian stocks. Mid-cap and small-cap stocks in India are particularly vulnerable to a sharp correction if rates rise after their record run last month.

 

Not all analysts are convinced that a US Federal Reserve rate hike is a foregone conclusion. Some pointed out that different US Fed governors have given differing views on rates recently and that the US economy has shown resilience despite the war in West Asia. For Chinchalkar, however, resilient growth in the US strengthens the case for a rate hike, as the central bank may seek to tackle crude-oil-led inflationary pressure before inflation rises sharply.

 

A majority of US Fed fund futures traders bet that the Fed will hike its benchmark federal funds target rate by 25 basis points to 3.75-4.00% at the September meeting. Tuesday, 60% of traders expected the US Fed to raise rates in September, up from 44% a month ago, according to the CME FedWatch tool. Traders expect at least two rate hikes by the central bank before the end of 2026.

 

WINNERS, LOSERS

Several fund managers and analysts are optimistic about metal and select oil stocks, as the supply disruption from the closure of the Strait of Hormuz points to higher prices. Consumer cyclical and pharmaceuticals are also in favour, supported by strong demand.

 

Investors are unlikely to turn to banks and information technology stocks in the near term, even as strong macroeconomic growth improves the sector's long-term prospects. Strong mobilisation of Foreign Currency Non-Resident (Banks) deposits helped bank stocks recover slightly. However, most gains were registered in mid- and small-cap names. Going forward, upside for major banks remains limited, analysts said.

 

"Banks are already seeing a lot of pressure showing up in their lending activity. Credit demand has definitely tapered off and... news flow from some of these large banks, we all know what's happening with HDFC (Bank)... sentiment-wise, it's a big negative for the sector," Chinchalkar said. "That brings into question how the Nifty (50) can rally to a new high if a sector which commands high weightage in the Nifty doesn't outperform," he said.

 

Information technology stocks are expected to decline in September as expectations of an interest rate hike by the US Fed have sparked concerns of lower discretionary spending. Lower contract value and lower revenue due to the adoption of artificial intelligence remain a major overhang for IT companies, analysts said. The artificial intelligence trade, which seemed close to unwinding, has found new life after strong quarterly results from Nvidia Corp. and other players in the sector.

 

Some fund managers are tactically buying select mid-cap IT names despite reservations about the sector, hoping these stocks have bottomed out.

 

The recent rally in mid-cap and small-cap stocks better reflects the robust expansion in economic activity than their large-cap peers, analysts said. "There are clear thematic trends — some cotton stocks look good, and agri-food companies are also good since prices of underlying commodities are very high after this weak monsoon," Vatsal Bhuva, technical analyst at LKP Securities, said.

 

Bhuva said he sees HDFC Bank and Reliance Industries under pressure on technical charts, which will keep the 50-stock index under pressure. ICICI Bank and Kotak Mahindra Bank, which have a lower weightage in the Nifty 50, present a good buying opportunity, he said.

 

BUY ON DIPS

Despite near-term input cost pressures, analysts are convinced that a further fall in various big names is a good opportunity to buy large-cap stocks. Many are pinning their hopes on strong domestic growth, strong earnings, and stable demand to help the market reclaim its all-time high, even if that target appears lofty in the near term.

 

"I think they (fund managers) will use any dip in realty stocks, which may come as a reaction to that first rate hike, as an opportunity to load up and wait it out and see what happens over the next six months or so," an analyst at a medium-sized domestic brokerage said.

 

While sectors are seeing near-term pain, some mutual funds and asset management companies are optimistic that the Nifty 50 will roar back in the medium term as strong earnings start justifying valuations. "We are overweight on financial services, IT, and along with that, there are a few insurance companies," Thomas said.

 

"Insurance companies have seen a lot of recent flip-flops in terms of regulatory changes, and that has kind of impacted their near-term performance. But our sense is the long-term trajectory still remains fairly strong," Thomas said. "IT is primarily a call in terms of... (expectations of) more (AI) implementation demand, which is appropriate for Indian IT players," he said.

 

BROKERAGE	Support 1	Support 2	Resistance 1	Resistance 2
Angel One	23800	23500	24050-24200	24500-24670
Choice International	23800-23750	2360	24000	24200
Globe Capital Market	23500	23200	24000	24800
HDFC Securities	23400	--	24500	--
Lakshmishree Investment and Securities	23800	23600	24000	24350
LKP Securities	23700	235600	24200	24300
SAMCO Securities	23500	--	24800	--
Ashika Group	23500	--	24500	--
Teji Mandi Investment Technologies	23700	--	24500	--
Nirmal Bang Institutional Equities	23700	23650	24300	24400
Median	23700	23550	24300	24325

End

 

With inputs from Arya S. Biju and Adhithya Aji

 

US$1 = INR 94.82

 

Edited by Saji George Titus

 

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