Indian equities ended September under heavy pressure, with persistent foreign selling, elevated crude oil prices and a sharp rise in US bond yields combining to drag benchmark indices sharply lower. The Nifty 50 and Sensex lost around 6% during the month, marking their steepest monthly decline since March 2026.
The sell-off also extended a prolonged weak phase for the domestic market. Indian benchmark indices have now declined for eight consecutive weeks, an unusually long losing streak, while India remains among the weaker-performing major equity markets so far in 2026.
The Sensex shed nearly 4,500 points during September, while the Nifty also recorded a 6% monthly decline.
Key points
Nifty 50 and Sensex fell around 6% in September
September marked the worst monthly performance since March
Indian markets have declined for eight consecutive weeks
Elevated crude oil prices continued to weigh on India’s macro outlook
US Treasury yields climbed to multi-year highs
Foreign investors remained heavy sellers in the secondary market
Tight global liquidity reduced investor appetite for emerging-market equities
The September decline was driven by a combination of domestic and global concerns rather than a single trigger.
Crude oil remaining near or above $100 a barrel continued to be one of the biggest risks for Indian assets. As India depends heavily on crude imports, sustained high oil prices can increase the country’s import bill, worsen inflationary pressures and put additional pressure on the rupee.
The impact of higher crude prices has remained a concern since the escalation of conflict in West Asia earlier this year. Oil prices had touched around $122 a barrel during the period of heightened geopolitical tension.
Another major factor behind the September sell-off was the sharp increase in US Treasury yields.
The US 10-year bond yield moved towards 5.3%, making US fixed-income assets more attractive compared with riskier emerging-market investments. Higher yields in the US can encourage global investors to shift money away from markets such as India.
The rise in yields came at a time when global liquidity conditions were already tight, adding further pressure on equity valuations and foreign fund flows.
India also faced relative valuation concerns as investors compared the domestic market with global markets benefiting from stronger artificial intelligence-linked investment themes.
Foreign institutional investor activity remained one of the biggest concerns for the Indian market during September.
Foreign investors sold shares worth around ₹44,000 crore in the equity cash market during the month, according to NSDL data. Their total equity sales during 2026 have reached around ₹2.60 lakh crore.
Selling intensified towards the end of September, with foreign investors offloading more than ₹20,000 crore of equities during the final two trading sessions.
The combination of high US bond yields, expensive domestic valuations and concerns over India’s macroeconomic outlook has continued to influence overseas investor positioning.
Foreign investor behaviour, however, has not been uniformly negative. While overseas investors remained sellers through the secondary market, they continued to participate in primary-market transactions.
Foreign investors sold more than ₹45,000 crore through stock exchanges during September, while investing around ₹9,676 crore through the primary market.
Their continued participation in selected mid-cap, small-cap and primary-market opportunities indicates that foreign investors are becoming more selective rather than completely withdrawing from Indian equities.
Crude oil above $100 a barrel
Higher oil prices raised concerns over India's import bill, inflation, fiscal position and rupee.
US 10-year yield near 5.3%
Higher US yields increased the relative attractiveness of dollar-denominated fixed-income investments.
Heavy FII selling
Sustained foreign selling created pressure, particularly on large-cap stocks.
Weak global liquidity
Tighter financial conditions reduced investors' willingness to take risk.
Relative lack of AI-linked market leaders
Indian equities faced competition from global markets benefiting from stronger artificial intelligence-led investment themes.
Global factors are expected to remain important for Indian equities in October.
Even if domestic economic fundamentals remain supportive, a sustained market recovery could be difficult unless global liquidity conditions improve and foreign selling moderates.
Investors are likely to closely track crude oil prices, the rupee, US Treasury yields and foreign institutional investor activity over the coming weeks.
Corporate earnings will also become increasingly important as markets look for companies with strong earnings visibility, healthy balance sheets and exposure to resilient domestic demand.
For Indian equities, the direction of crude oil and global bond yields could remain as important as domestic fundamentals in determining whether the market can stabilise after September's sharp correction.