• Muted performance during SAMVAT 2081: The leading indices exhibited subdued performance throughout SAMVAT-2081 due to various challenges. The returns were significantly impacted by disappointing corporate earnings, uncertainties stemming from global tariffs, persistent selling by foreign institutional investors in the secondary market, rupee’s underperformance against the dollar, and a buoyant primary market resulting in substantial equity supply (~Rs 1.7 trillion raised in the last 12 months). From Diwali 2024 to September 30, 2025, the Nifty 50 and Sensex recorded minimal returns of 1.3% and 0.7% respectively. Additionally, the broader market activity was lackluster, with the Nifty SmallCap index declining by 6.6%. Weakness was prevalent across sectors with IT, Power, and FMCG sectors falling by 18.1%, 15.0%, and 7.7% respectively. Conversely, the Auto index emerged as the standout performer, achieving a return of 9.4% led by GST reduction and demand recovery.
• Corporate earnings and uncertainties stemming from tariffs have posed significant challenges: The Nifty 50 index, after achieving record highs in September 2024, has faced pressure due to disappointing earnings during 2HFY25. The earnings growth for Nifty 50 companies in 2QFY25 was the lowest since Dec’22, reflecting a modest Nifty EPS growth 7.6% YoY, as the General and State election code of conduct affected capital expenditure activities. Furthermore, the implementation of the Liberation Day tariff by the United States on April 2, 2025, which introduced a 10% baseline tariff on imports from nearly all countries, has created uncertainty and dampened demand for export facing sectors such as auto components, textile, gems & jewellery, marine & pharma. The uncertainty surrounding tariffs continues, as India is yet to finalize a trade agreement with the United States. India continues to be the most tariffed nation amongst the emerging markets along with Brazil while peers in South Asia, ASEAN, Latin America and Middle East have managed lower tariff rates.
• FIIs pullback from Indian equities; USD/INR hit record low: FIIs have net offloaded equities worth Rs 2.4 trillion from Nov’24 to Sep’25, while DIIs have significantly countered this trend with net purchases amounting to approximately Rs 6.6 trillion. Meanwhile, the US market continues to achieve record highs. Factors such as robust US corporate earnings, tax relief measures (notably the One Beautiful Bill act), improved GDP figures, and interest rate reductions are propelling the market upward. The prospect of an additional two rate cuts is contributing to a buoyant bond market. The rupee is approaching Rs 89 per dollar, making it one of the poorest performing emerging market currencies, adversely affected by substantial FPI selling, restrictions on H1-B visas, and secondary tariffs imposed by the US.
