Financial Markets and Investment - Newspaper Summary

 The sources provide a detailed snapshot of Financial Markets and Investment in India in October 2025, emphasizing the interplay between domestic policy adjustments, global economic headwinds—particularly US tariffs—and evolving investment trends across equity, debt, and specialized asset classes.

I. Financial Market Performance and Outlook (October 2025)

The Indian stock market in early October 2025 showed signs of recovery after a recent volatile period, driven by specific fiscal and monetary policy actions.

Market Momentum and Volatility

• The Nifty 50 index closed at 24,894.25 and the S&P BSE Sensex at 81,207.17 on Friday, October 3, 2025.
• The Nifty 50 had previously fallen more than 3% over eight straight days of decline but bounced back 0.9% on October 1 and continued to recover.
• This volatility was partly triggered by US President Donald Trump’s proclamation of a one-time $100,000 payment on new H-1B visa petitions in late September, which led to a 3.2% dip in the Nifty 50.
• Market experts anticipate a possible revival that might see the benchmark indices test their June-end high of 25,669.30 (a 3% rally) by or before the Diwali week (October 18-23), provided there are no fresh negative surprises from the US administration.
• However, the prevailing sentiment suggests that this phase of the Indian stock market moving sideways without significant swings could continue for several months due to numerous critical factors and uncertainties, including geopolitical setbacks.

Policy Catalysts for Market Sentiment

The recent positive market movement is attributed to a combination of monetary and fiscal stimuli:

1. Monetary Policy Action: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting, concluding on October 1, introduced positive measures, including allowing banks to finance corporate acquisitions and enhancing limits for lending against shares and Real Estate Investment Trusts (REITs). This dovish approach is expected to spur consumption and credit growth. The RBI had already cut the signal repo rate by 100 basis points between February and June 2025.
2. Fiscal Stimulus: A boost to market sentiment came after the GST Council’s simplification of the indirect tax to a two-slab structure (5% and 18%) effective September 22. This GST rationalization, along with earlier income tax relief, is beginning to aid consumer sentiment and is expected to be a positive development.

II. Global and Indian Macroeconomic Context

Financial markets are operating amid a climate of "unprecedented uncertainty," fundamentally linked to trade and geopolitical tensions.

US Tariffs and Global Uncertainty

• The US’s rapidly changing tariff policies have made it tough to predict India’s inflation and growth trajectories. External Affairs Minister S. Jaishankar acknowledged that unresolved issues with the US regarding trade talks have led to tariffs being levied on Indian goods.
• India faces a severe additional 25% tariff penalty for sourcing energy from Russia, which Jaishankar described as "unfair, unjustified and unreasonable".
• The Asian Development Bank (ADB) has maintained India's GDP growth rate forecast at 6.5% for FY26 but notes that high tariffs are creating challenges, leading to a modest downgrade compared to earlier forecasts. ADB suggests that stronger economic relations between India and China could help counteract negative external pressures.

Monetary Policy Response to Uncertainty

• In times of radical uncertainty, traditional models falter, and the RBI might respond by easing rates or waiting for the situation to clear. Because uncertainty discourages consumer and business spending, rate cuts may not translate into higher investments.
• The RBI has noted that despite monetary easing, bank credit growth is sluggish, but Non-Banking Financial Company (NBFC) credit and fund mobilization from the capital market are growing healthily. Recognizing this, the RBI has widened the bank financing pipeline to enable deeper participation in capital markets, rather than solely pushing for more rate cuts.

III. Investment Flows and Capital Markets

Foreign and Domestic Flows

• Foreign Portfolio Investors (FPIs) were significant sellers in Indian equities over the past 12 months, and specifically withdrew ₹23,885 crore in September 2025, marking the third straight month of net sales.
• The total FII selling for the last 21 months reached a massive ₹3,19,313 crore.
• However, FPIs became net buyers on October 3, infusing ₹1,150.25 crore, driven mainly by debt investments through the Voluntary Retention Route (VRR).
• Domestic Institutional Investors (DIIs), particularly mutual funds, play a crucial stabilizing role. D. P. Singh of SBI Mutual Fund noted that mutual funds act as "dry ammunition," deploying cash reserves during market dips to stabilize prices, thereby reducing dependency on FIIs.

Primary Market Activity (IPOs and NBFCs)

• India's Initial Public Offering (IPO) market is witnessing a surge despite broader macroeconomic turbulence, with a pipeline of public offerings worth more than ₹1 trillion. This buoyancy is supported by abundant domestic liquidity.
• Tata Capital Ltd is launching its ₹15,511 crore IPO on October 6, 2025, comprising a fresh issue of ₹6,846 crore and an offer for sale (OFS) worth ₹8,666 crore, making it India's fourth-largest IPO. The company plans to use the fresh proceeds to strengthen its Tier-I capital.
• The NBFC sector is highly robust, with credit growth expected to sustain 17-18% in FY26, significantly outpacing nominal GDP and bank credit growth. The Finance Industry Development Council (FIDC) recently received the RBI’s final approval to function as a Self-Regulatory Organisation (SRO) for NBFCs, focusing on governance, compliance, and sustainability.

Specialized Investment and Sectoral Trends

• Real Estate Investment Trusts (REITs): The Securities and Exchange Board of India (SEBI) recently classified REITs as equity assets for mutual funds (September 12), a move expected to deepen the market. REITs generally provide pre-tax distribution yields of 4.7% to 5.5% and total returns of 16.7% to 24% over the past two years. They are gaining traction due to consistent cash flows from rental income that include built-in escalations, mitigating inflation risk. Demand for REITs is supported by strong tailwinds from companies setting up Global Capability Centres (GCCs) in India, partially spurred by US protectionist behavior.
• Debt Market: Yields on government bonds have recently risen, creating a better entry point for investment in debt funds and instruments compared to four months ago. For instance, the cut-off yield in the State Government Securities (SGS) auction on September 30 was 7.58%, higher than some AAA-rated corporate bonds, presenting a market opportunity.
• Private Equity in Healthcare: PE investments in Indian hospital chains slowed significantly in 2025 ($142 million so far) compared to previous years. The focus is shifting from large buyouts to large IPOs, with major chains like Manipal Hospitals heading towards public markets. PE firms are increasingly focusing on single-specialty hospitals due to lower capital expenditure intensity.
• Investment in Financial Sector: The financial sector is viewed as particularly attractive for long-term investment due to the strengthening ecosystem.

Cryptocurrency Market

• Globally, Bitcoin set a new all-time high, climbing above $125,000 on Sunday, October 5, 2025. This surge is linked to a broader risk rally around the US government shutdown and institutional inflows into Bitcoin ETFs, reflecting the "dollar debasement narrative".
• In the context of future payment systems, decentralized crypto assets remain volatile tokens for speculation. However, the Trump administration is favoring dollar-pegged stablecoins (via the GENIUS Act) to preserve the dollar's global dominance, while China is pushing its CBDC (e-CNY) for cross-border transactions to mitigate US financial sanctions risk.