Finacrest Weekly Market Wrap

Last week was one of the most volatile weeks Indian markets have seen in months. The Nifty 50 slipped 2.65%, snapping a three-week winning streak, as global cues turned risk-off after the US announced fresh tariffs on pharmaceuticals and steep H-1B visa fees. Mid- and small-cap indices dropped 3–4.5%, and every sector ended in the red.

Foreign investors continued to exit Indian equities for the 13th straight week, offloading ₹19,570 crore worth of shares. Cumulatively, ₹30,141 crore was withdrawn in September alone — offset only by strong domestic buying of ₹55,736 crore by mutual funds and institutions. The rupee touched a fresh record low of ₹88.80 against the US dollar before ending near ₹88.71.

Policy direction provided some relief. The RBI held rates steady at 5.50%, but its October review carried a dovish tone — cutting its FY26 inflation forecast to 2.6% and raising growth to 6.8%. A raft of pro-credit measures to ease bank lending and support liquidity helped stabilise sentiment toward week-end.

Sector rotation continued. IT and Pharma led the declines early in the week amid tariff and visa fears, while Financials and Metals outperformed post-policy. Technical indicators show markets in oversold zones — offering scope for a short-term bounce but calling for patience before fresh allocations.

Looking ahead: Investors will track Q2 earnings, RBI implementation measures, and festive season demand to gauge whether the rebound can sustain into October.

1️⃣ Macro & Markets — Risk-off, then a RBI-led respite

Equities: After a sharp slide into September 30, markets steadied mid-week and finished Friday modestly higher, with the Nifty closing near 24,894. The RBI’s policy stance offered relief even as FIIs remained cautious.

Flows: Foreign portfolio investors continued heavy selling — September saw equity outflows of about ₹23,885 crore, while DIIs kept providing a cushion. Year-to-date, FPIs have pulled out close to ₹1.98 lakh crore from equities.

Currency: The INR touched a record low of ₹88.80 per USD before ending the week near 88.77, pressured by global risk-off sentiment and a strong dollar.

2️⃣ Policy — RBI holds but turns dovish in tone

The Reserve Bank of India kept the repo rate unchanged at 5.50 % and retained a neutral stance. It lowered its FY26 inflation forecast to 2.6 % (from 3.1 %) and raised FY26 GDP growth to 6.8 % (from 6.5 %). Governor Sanjay Malhotra emphasised preserving policy space while supporting growth.

Beyond rates, the RBI announced pro-credit regulatory measures — easing capital rules for banks, permitting greater participation in financing against securities, and encouraging infrastructure lending — signalling an intent to keep financial flows robust.

3️⃣ Global Overhang — US tariffs & H-1B fee shock

New policies: The US announced 100 % tariffs on branded pharmaceuticals and a US $100,000 H-1B visa fee per worker, sparking concern across India’s IT and Pharma sectors. Legal challenges to the H-1B fee are already underway.

Market impact: These developments weighed heavily on sentiment and contributed to sectoral weakness in

IT and Pharma stocks during the week. Both sectors saw sharp declines, with the Nifty IT index down around 8% and the Pharma index falling by over 5%.

4️⃣ Sectors — Metals and Financials show resilience

Pressure pockets: The early part of the week saw steep corrections across the board. IT, Pharma, Realty, and Defence were among the worst hit. The broader market declined between 3–4.5%.

Recovery zone: Post-RBI policy, momentum returned in select pockets. Private Banks, Financial Services, Metals and PSU Banks saw renewed strength by Friday, though defensives like FMCG and Healthcare lagged.

5️⃣ Technical & Derivatives — Oversold bounce forming

After recording one of the steepest weekly falls in seven months (Nifty down 2.65% in the week ending 26 Sept), markets entered oversold territory on several indicators. This week’s RBI-triggered bounce suggests that a near-term bottom may be forming.

Derivatives data shows FIIs buying index options and trimming index futures positions — a signal of hedged, tactical positioning ahead of the festive quarter.

6️⃣ Economic Outlook — Balancing inflation & growth

RBI’s dovish communication highlights confidence in disinflation and a resilient growth trajectory. Inflation is trending lower, and GDP upgrades reflect continued domestic strength despite weak global cues.

Key drivers to watch in October include GST rationalisation-led consumption boost, festive spending patterns, and any US policy countermeasures that could affect IT and Pharma exports.

7️⃣ Finacrest Takeaways — Our View

• Asset Allocation: Use volatility to rebalance portfolios. Avoid chasing short-term rallies; stay aligned with long-term allocation goals.
• Sectors: IT and Pharma weakness is policy-driven — maintain select exposure to quality names with global pricing power. Financials and Metals may sustain near-term momentum.
• Currency Management: With INR near record lows, exporters should lock partial receivables; importers should review hedge cover.
• Liquidity & Rates: No rate cut yet, but RBI’s tone hints that the next move is likely downwards when global conditions stabilise.

8️⃣ What Lies Ahead

The coming weeks will focus on:

• Q2 FY26 corporate earnings season and margin trends.
• Follow-through on RBI’s regulatory announcements.
• Impact of festive consumption and auto sales data.
• Monitoring of FPI flows and USD strength.

📊 Sources & References

• RBI October 2025 Monetary Policy & Projections — Press Information Bureau, Moneycontrol
• Market Wraps — ET Markets, Reuters, ICICIdirect post-policy note
• FPI & DII Data — Times of India, ET Markets
• Currency Update — Reuters, Economic Times INR coverage
• Tariffs & Visa Fee — Reuters, LiveMint, American Immigration Council, Times of India
• Derivative Trends — FINNOC FII Derivatives Report

© Finacrest Wealth Pvt. Ltd. | Weekly Newsletter | Week 40, FY25-26