Market Mood Index Falls to 23.90, in ‘Extreme Fear’ Zone, as War, Oil and Rupee Weigh on Investors

Mumbai, Oct 12: Tickertape’s Market Mood Index (MMI) stood at 23.90 on Monday, placing it in the “extreme fear” territory. Any reading below 30 falls into this category. This could be a good time to start building new positions, as the market may bottom out and begin to rise from here. However, the concerns driving the market’s decline remain valid. 

Indian stocks have also taken a hit. The Nifty 50 closed at 22,520 on Friday, 14.6% below its 52-week high of 26,373.20 and just 1.5% above its 52-week low of 22,179.90. 

Friday also marked the end of the longest streak of consecutive weekly losses in 25 years. However, the Nifty and Sensex had fallen 8.7% and 8.4%, respectively, over the preceding eight weeks, before gaining just 0.4% and 0.8%, respectively, last week. 

Foreign investors are the swing factor, and their activity is one of the six inputs of the MMI. They sold a net ₹12,944 crore of Indian equities on Thursday, their largest single-day outflow since May 29. A rupee that has lost more than 7% this year and hovers near record lows erodes dollar returns, while higher global bond yields make safer assets more attractive. The RBI’s hawkish rate increase to 5.50% earlier this week, the first since February 2023, added to the pressure. 

Domestic investors have been the cushion. Domestic institutions bought ₹10,703 crore of shares on Thursday, absorbing much of the foreign selling. Even so, tighter monetary policy raises borrowing costs, the RBI has lifted its FY27 inflation forecast to 5.2%, and fresh uncertainty over US immigration rules, including the suspension of firms from the Permanent Labor Certification Program, has raised concerns for Indian outsourcing firms. 

The biggest headwind is the Iran war. The conflict, which began at the end of February with US and Israeli attacks on Iran, has kept the Strait of Hormuz, the route for a fifth of the world’s oil and liquefied natural gas before the war, shut. On Sunday, Iran’s security chief Mohsen Rezaei called the US response to Tehran’s seven conditions for reopening the strait “insufficient,” and on Saturday Houthi missiles hit Riyadh airport, killing 12 people. Brent is at $102.99 a barrel even after a 1.65% fall on Monday, a heavy burden for India, which imports most of its oil, through a wider import bill, a weaker rupee and higher inflation. 

There are some offsets. President Donald Trump declared an “energy ceasefire” between Russia and Ukraine, and Wall Street ended Friday higher with the Dow up 0.83% and the S&P 500 up 0.59%. The Nifty IT index rose 3% on Friday. The RBI has opened a special dollar window for Indian Oil, Hindustan Petroleum and Bharat Petroleum to ease pressure on the rupee. 

For investors, the message is mixed. A reading of 23.90 says sentiment is stretched to the downside, which the index reads as a sign that markets may be oversold, but it does not say when the headwinds will ease, and the MMI measures mood, not valuation. 

How the MMI Is Measured 

Tickertape builds the MMI from six factors: foreign institutional investor (FII) activity, volatility and skew, momentum, market breadth, price strength and demand for gold. Each factor’s current value is compared with its 45-trading-day rolling average and standard deviation to see how far it has moved from the mean. The readings are then normalised to a scale of 0 to 100, and all six factors are given equal weight in the final number. A score below 30 falls in the extreme fear zone, while higher readings move through fear and greed toward extreme greed.