Geopolitical Developments Set to Drive Markets 

Indian markets are expected to open moderately higher on the back of stronger GDP growth numbers and mildly positive cues from few of the Asian markets. 

U.S. equity indexes closed modestly lower on light trading volumes on Friday as markets entered the holiday weekend marking summer’s unofficial end.  August delivered strong monthly performance across all indexes—the Dow gained 3%, the S&P 500 rose 2.6% for its fourth consecutive monthly advance, and the Nasdaq climbed 2.8% for its fifth straight monthly gain.

Indian markets closed the week with sharp declines, primarily driven by investor concerns over the 50% US tariff on Indian imports, which was implemented on August 27.  

The rupee weakened significantly due to the strength of the dollar, capital outflows, and trade tensions. Both Sensex and Nifty declined 1.8%, while BSE Mid-Cap and Small-Cap indices fell 2.7% and 2.9%, respectively.

In a significant geopolitical development, Prime Minister Narendra Modi is in Tianjin, China, to attend the SCO Summit at the invitation of President Xi Jinping. PM Modi met with Xi Jinping on Sunday and is expected to hold meetings with Russian President Vladimir Putin and other world leaders on the sidelines of the Summit.

Foreign Institutional Investors sold over Rs 21,000 crore, while Domestic Institutional Investors provided support with purchases worth Rs 28,600 crore this week. This domestic buying partially offset foreign outflows but failed to prevent overall market weakness.

The Nifty has declined 750 points from its recent high of 25,153, with investors remaining cautious due to concerns about inflation, uncertainties in global growth, and volatile foreign capital flows.

Nifty is in continuation of a downtrend and seems to be approaching its previous swing low support of 24337. The crucial 200-day EMA for the Nifty is currently placed at 24,267, which could serve as a significant short-term support level.  

At the beginning of the September series, FPIs held an extremely bearish 0.09 long-to-short ratio (92% short positions)—the lowest since March 2023—though oversold conditions and aggressive put writing at 24,000-24,050 levels suggest limited downside and potential for a pullback rally.

On the upside, resistances for the index have now shifted down to 24,572 and 24,700, which could act as immediate hurdles for any rebound. 

Source: HDFC Securities Prime Daily, 1 Sept 2025 

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