Overview of Market
Overview
Indian large caps outperformed the broader market, with Sensex and Nifty 50 gaining 2.7% and 1.9%, respectively. In contrast, the Nifty Midcap 100 and Nifty Smallcap 250 declined 3.4% and 5.8%. The rally was largely driven by the IT sector, which surged 17.7%, its strongest performance in six years. The RBI raised the repo rate by 25 bps to 5.50% in-line with expectations and shifted its stance to calibrated tightening, citing persistent inflation risks. September CPI rose to 5.5%, its highest level this year and the fourth straight month above 4%, driven by food inflation of 7.7%. WPI came in at 11.4%. Domestically, corporate earnings have sustained their growth momentum in 2QFY27 so far, building on a meaningful recovery witnessed in 1QFY27 after two years of muted performance. More importantly, the recovery is not merely reflected in aggregate earnings growth but is increasingly broad-based across sectors, despite persistent commodity cost pressures and an uncertain global environment. During the month, global central banks opted for a temporary pause amidst a tightening cycle. US Fed, BoJ, RBNZ and ECB kept policy rates steady. Starting 2027, the FOMC will dedicate one of its eight annual meetings to review its broader monetary policy framework, with no rate decision or policy statement expected. This will increase to 2 such meetings from 2028. Despite posting negative returns, US equities outperformed most major global markets, except for India. The S&P dropped ~1% while the Nasdaq Composite lost 6.7%, which were still better than Kospi (-16.2%) and CSI 300 (-8.5%), as the AI trade lost some steam, and capital rotated into other sectors. The upcoming US midterm elections are a key near-term event for global markets. Potential shifts in fiscal, trade and regulatory policies could drive volatility in global equities, capital flows, warranting close investor attention.
Fixed-Income, Currency and Commodity Markets
Global bond yields eased on expectations of a central bank pause, with tech-led equity weakness boosting demand for Treasuries. In contrast, India's 10-year G-Sec yield rose to 7.50%, driven by tighter liquidity following the RBI's OMO sale announcement and higher CRR maintenance requirements. DXY firmed marginally from 101.45 to 101.88 by late October, but the more striking move was in EM FX, which came under heavy pressure as the Fed’s hawkish hold and rising oil prices created pressure. Energy prices surged as geopolitical tensions pushed Brent crude above US$115/bbl. Gold retreated amid higher US yields and a stronger dollar, while base metals remained supported by supply constraints despite weaker Chinese demand. Agricultural commodities were mixed, with cocoa impacted by supply disruptions in West Africa and wheat and corn remaining volatile amid tighter global harvests.
Flows & sectoral performance
DIIs remained net buyers (~₹62,220 Cr), while FIIs continued to be net sellers (~₹45,162 Cr). Sectors outperforming benchmark: IT (+17.7%), Pharma (-2.6%) | Sectors underperforming benchmark: Metals (-7.6%), Energy (-4.6%). Fund Performance (5-year period ending Oct’26) - Equity & Growth Funds: Annualized returns of 6–13% - Balanced & Bond Funds: Annualized returns of 5–8% (Refer to annexures for detailed fund-wise performance)
Old Method
New Method