Indian markets would be guided this week by the US Fed's decision and FII activity

The US Federal Reserve's interest rate decision is expected to be the primary worldwide cue influencing sentiment during the crucial week that Indian equity markets will begin on the 8th of December 2025. Analysts point out that amid continued currency headwinds from a declining rupee that just broke 90 to the dollar, the Fed's remarks on potential rate cuts may influence risk appetite across developing markets, including India. ​

​Recent FII Selling and DII Support

Despite robust Domestic Institutional Investor (DII) purchases of around ₹19,800 crore, Foreign Institutional Investors (FIIs) have sold shares worth over ₹10,400 crore so far in December, continuing a selling trend that has put pressure on benchmarks. The Sensex and Nifty closed flat last week as markets processed the RBI's unexpected 25-basis-point repo rate decrease to 5.25%, in contrast to this net outflow. ​

Key Domestic Triggers: CPI Data and Rupee Movement

Rate-sensitive industries like banking and automobiles may be impacted by India's CPI inflation data, which is due on the 12th of December and will be widely watched for hints on consumption trends and the RBI's future actions. The trajectory of the rupee is still crucial, with investors watching for any stabilization in the face of tariff threats and tensions in international trade. ​

Analyst Outlook and Sector Focus

Ajit Mishra of Religare Broking points out that if the Fed becomes cautious and favors large-caps and defensives, India's strong growth puts it in a strong position for fund flow rotation. After the RBI cut, rate-sensitive industries may witness growth, but momentum will depend on FII flows. Bajaj Broking With support at 25,700, the Nifty is consolidating at 26,500. ​