Market Recap: A Week of Losses, Then a Slight Recovery
Indian equities ended last week with modest losses, extending a multi-session losing streak before staging a partial recovery in the final session. The Sensex gained just 3 points to close at 77,540.83 on Friday, August 21, while the Nifty rose 20 points (0.08%) to settle at 24,252. Broader indices fared slightly better: the Nifty Midcap 150 advanced 0.08% and the Nifty Smallcap 250 gained 0.41% on the day.
Despite Friday's marginal gains, both key benchmarks posted weekly declines. The Nifty fell approximately 0.44% during the week, while the Sensex slipped nearly 0.60%. The Indian market has now logged losses for the second consecutive week, according to analysts.
Four Factors That Could Drive Dalal Street Next Week
Market participants are bracing for a volatile week ahead, with four key factors likely to dictate direction: the evolving US-Iran situation, crude oil price movements, rising bond yields, and a speech by the US Federal Reserve Chairman.
1. Iran-US Tensions: Sanctions Threat Loom
Washington and Tehran exchanged defiant messages ahead of a scheduled announcement of new US economic sanctions on Monday. US Treasury Secretary Scott Bessent is set to hold a press conference, promising to unveil "the toughest sanctions in history" against Iran while urging China to cooperate.
Iran's Foreign Ministry spokesperson Esmaeil Baghaei responded on Saturday, calling the possible sanctions an "assessment of extraterritorial sovereignty over every independent member state of the United Nations." In a post on X, Baghaei added that "such secondary sanctions find no foundation in international law." The escalation has made the interim peace agreement between the US and Iran obsolete.
China, which buys more than 80% of Iran's oil according to 2025 data from analytics firm Kpler, has urged diplomacy. Beijing has not yet indicated how it will respond to the latest US pressure.
The escalation follows a period of heightened conflict: the US and Israel launched airstrikes on Iran on February 28, triggering a selloff in global markets. Although hostilities have largely eased since then, there is limited clarity on a durable peace process. Any fresh escalation could trigger renewed risk aversion across global markets.
2. Crude Oil Prices: The $90 Mark and Its Aftermath
Oil futures ended higher on Friday after US President Donald Trump threatened economic sanctions against countries trading with Iran, raising concerns about disruptions to global crude supplies.
Brent crude futures settled near $95 per barrel, while WTI crude gained above $87 per barrel in the previous session. Crude had soared close to $130 earlier in the year, then cooled to around $80, before "retriggering spikes" in recent weeks, according to market observers.
For India, which remains heavily dependent on imported crude, sustained high oil prices could pressure inflation, the rupee, corporate margins, and the current account deficit. Vinod Nair, Head of Research at Geojit Investments, noted that investor sentiment stayed defensive through much of the week as crude pushed past the psychologically important $90 level. He added that markets clawed back losses towards the close, drawing support from value buying in financials and resilience of domestic fundamentals.
3. Bond Yields: A Two-Month High and Its Implications
The yield on India's 10-year benchmark bond rose to a two-month high of 6.85% on Friday before retreating slightly to 6.85%. The move represented a jump of nearly 10 basis points during the week, marking the highest weekly rise this fiscal year.
In the US, Treasury yields also climbed: the 10-year note reached 4.736%, the 30-year bond 5.37%, and the 2-year note 4.24%. Rising US yields typically put pressure on emerging-market equities by attracting capital flows towards dollar-denominated assets.
4. Federal Reserve Speech: Jackson Hole in Focus
Federal Reserve Chairman Kevin Warsh is scheduled to deliver the first keynote address at the annual Jackson Hole Economic Policy Symposium in Wyoming on August 28. His remarks will be scrutinized for clues on the future trajectory of US interest rates.
In addition, US PCE inflation data — the Fed's favored inflation gauge — will be watched closely, as persistent inflation concerns have been a recurring theme in global markets.
Analyst Views: Defensive Stance, But Some Resilience
Market experts remain cautiously optimistic, pointing to pockets of strength despite the overall defensive tone.
Vinod Nair of Geojit Investments highlighted that small-caps "bucked the broader weakness, supported by stronger earnings visibility and domestic-facing character." He also noted that value buying in financials helped the market pare losses late in the week.
From a technical perspective, Rupak De, Senior Technical Analyst at LKP Securities, said the Nifty remained range-bound between the 20-day and 50-day exponential moving averages on the hourly chart. He identified support at 24,200 and resistance at 24,350, suggesting the index needs to break above 24,350 to see sustained upside.
Outlook: Crude and Geopolitics to Set the Tone
With the US-Iran situation still fluid and crude prices elevated, analysts expect Indian equities to remain volatile in the coming days. The market's direction will likely hinge on the outcome of the sanctions announcement, any fresh geopolitical developments, and the tone of Chairman Warsh's speech.
While the domestic market has shown resilience in the face of multiple headwinds, the combination of high oil prices, rising bond yields, and geopolitical uncertainty could keep investors on edge. As always, the trajectory of crude oil will be a key determinant of Dalal Street's fortunes in the week ahead.