Indian equity benchmarks ended the volatile day of trade with a cut of one third of a percent following a sell-off overnight in the US markets on fears of that interest rates will stay higher for longer. Markets made a cautious start as escalating diplomatic tensions between India and Canada impacted sentiments. India temporarily suspended visa operations with Canada for an indefinite period due to alleged security threats against diplomatic staff, amidst a diplomatic crisis that arose following the latter's allegation that India is responsible for the killing of a Sikh activist. Persistent selling by FIIs dampened sentiments in domestic markets. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FII) sold shares worth Rs 3,007.36 crore on September 21. However, markets traded in green for brief period in noon deals as some support came with reports that India's inclusion in the JPMorgan Government Bond Index is positive, though short-term equity challenges may persist due to Foreign Portfolio Investors' selling as the US dollar strengthens. Sentiments also got boost as Reserve Bank Deputy Governor Michael D Patra said that India will be a $5 trillion economy and the third largest in the world by market exchange rates by 2027, aided by the demographic advantage and pace of financial sector development. Meanwhile, RBI said that it has proposed tighter norms for treatment of wilful defaulters under which banks and other lenders will be required to examine all accounts with outstanding amount of Rs 25 lakh and more to see if the borrower is deliberately not repaying the loan. The central bank has issued a Draft Master Direction on Treatment of Wilful Defaulters and Large Defaulters on which comments have been invited till October 31. However, key gauges failed to hold gains and selling in last leg of trade dragged benchmarks lower for the day. Finally, the BSE Sensex fell 221.09 points or 0.33% to 66,009.15 and the CNX Nifty down by 68.10 points or 0.34% to 19,674.25.

The US markets ended lower on Friday, magnifying their recent sessions' losses, as concerns about the outlook for interest rates continued to weigh on the markets.  While the Federal Reserve left interest rates unchanged as widely expected on Wednesday, the central bank forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated. Traders were reluctant to make significant bets ahead of the release of some key economic data next week that could impact the outlook for interest rates. Next week will see the release of a report on personal income and spending that includes readings on inflation said to be preferred by the Fed. On the sectoral front, most of the major sectors ended the day showing only modest moves contributing to the lackluster close by the broader markets. Airline stocks showed a significant move to the downside, however, with the NYSE Arca Airline Index falling by 1.5 percent to its lowest closing level in six months. Significant weakness also emerged among banking stocks, as reflected by the 1.3 percent loss posted by the KBW Bank Index. The index fell to a nearly three-month closing low. Tobacco and commercial real estate stocks also saw some weakness on the day, while strength remained visible among computer hardware and software socks.

Crude oil futures ended higher on Friday following Russia's decision a day earlier to temporarily ban the export of diesel and gasoline, which has pushed up prices in Europe. Besides, a private report said that crude prices in the U.S. and in international markets to move up to, or past, $100 a barrel, a level oil has not seen since last year. Benchmark crude oil futures for November delivery rose $0.40 or 0.5 percent to settle at $90.03 a barrel on the New York Mercantile Exchange. However, Brent crude for November delivery lost $0.03 to settle at $ 93.27 a barrel on London's Intercontinental Exchange.

Indian rupee ended higher on Friday as the inclusion of India in the JPMorgan bond index boosted investor sentiment. Global financial firm -- J P Morgan has said it plans to include Indian government bonds (IGBs) or government securities (G-Secs) into its benchmark Emerging Market index from next year, a move that will bring down borrowing cost for the government. On the global front, the yen fell sharply on Friday after the Bank of Japan (BOJ) kept interest rates in negative territory days after the Federal Reserve signalled U.S. borrowing costs would stay high, piling pressure on the Japanese currency. Finally, the rupee ended at 82.94 (Provisional), stronger by 19 paise from its previous close of 83.13 on Thursday.

The FIIs as per Friday's data were net sellers in both equity and debt segments. In equity segment, the gross buying was of Rs 10022.71 crore against gross selling of Rs 11898.09 crore, while in the debt segment, the gross purchase was of Rs 428.24 crore with gross sales of Rs 676.41 crore. Besides, in the hybrid segment, the gross buying was of Rs 7.95 crore against gross selling of Rs 61.05 crore.

The US markets ended lower on Friday as concerns about the outlook for interest rates continued to weigh on the markets. Asian markets are trading mixed on Monday as investors look toward inflation data from across the region this week. Indian markets ended lower on Friday after hawkish remarks on interest rates from the U.S. and Federal Reserve and other major central banks. Today, start of new week is likely to be cautious amid mixed cues from global markets. Also, the ongoing diplomatic tension between India and Canada likely to weight on markets. Continued foreign fund outflows likely to dent domestic sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FII) sold shares worth Rs 1,326.74 crore on September 22. Traders will be concerned as the Reserve Bank said India's foreign exchange reserves declined $867 million to $593.037 billion in the week ended September 15. In the previous reporting week, the overall reserves dropped $4.99 billion to $593.90 billion. Some cautiousness will come as the finance ministry kept its estimate for the country's real gross domestic product (GDP) growth in 2023-24 (FY24) unchanged at 6.5 per cent. However, it has cautioned that the monsoon deficit in August could affect both kharif and rabi crops and said rising crude oil prices needed to be watched. Traders may take note of a private report that the Reserve Bank is likely to maintain status quo on policy rates for the fourth time in a row at its bi-monthly monetary policy review meeting early next month, as retail inflation continues to remain high and the US Federal Reserve has decided to keep a hawkish stance for some more time. However, some support may come as Chief Economic Advisor V Anantha Nageswaran said the inclusion of Indian government bonds in JP Morgan's emerging market debt index is expected to broaden India's investor base, potentially appreciate the rupee, and make it easier for Indian financial institutions to lend money. He added the move is also likely to simplify financing of the current account deficit (CAD) while reducing government borrowing costs. There will be some reaction in shipping and port industry stocks as shipping minister Sarbananda Sonowal said India expects to sign investment pacts worth Rs 10 lakh during the Global Maritime India Summit in New Delhi scheduled for October 17-19. Also, there will be some movement in semiconductor related stocks as electronics and IT minister Ashwini Vaishnaw said the central government will focus on niche opportunities in the semiconductor space, including compound semiconductors, where it can quickly emerge as a global leader. Meanwhile, there will be some buzz in primary market as two mainboard initial public offers (IPOs) will open for subscription. JSW Infrastructure is planning to raise Rs 2,800 crore, while Updater Services aims to mop up Rs 640 crore.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Tata Motors has launched the new, revolutionary Ace EV in Nepal, with its sole authorised distributor, Sipradi Trading.
• JSW Steel's step-down subsidiary -- Periama Holding LLC's step-down subsidiary -- Caretta Minerals LLC has entered into an agreement to sell its plant and equipment for a consideration of $24 million to West Virginia Properties. 
• Reliance Industries arm -- Reliance Jio is offering a free prepaid plan for six months to iPhone 15 buyers who purchase the latest Apple product from Reliance Digital, JioMart, or Reliance Retail Stores.
• State Bank of India has raised Rs 10,000 crore through 15-year infrastructure bonds priced at a rate of 7.49 per cent.