By Research desk
September 2025 Market Performance Recap:
Indian equities entered a consolidation phase in September 2025, with benchmark indices ending largely flat—the Nifty edged down 0.06% to 24,611 and the Sensex slipped 0.1% to 80,268. Beneath the muted headline, mid- and small-caps continued to outperform, with the Nifty Next 50 rising 2.04%, BSE MidCap up 0.84%, and SmallCap advancing 0.72%, reflecting selective investor appetite amid policy transitions.
The month was dominated by macro and policy developments, notably the rollout of GST 2.0 on September 22, which triggered short-term disruptions but is expected to yield long-term structural benefits. Foreign portfolio investors extended their selling streak for the third consecutive month, pulling out $2.7 billion (₹23,885 crore)—the largest monthly outflow since 2022—taking total 2025 outflows near ₹1.6 trillion. The selling was concentrated in sectors affected by GST uncertainty and global trade headwinds, while domestic institutional investors absorbed the pressure with over ₹60,000 crore in net buying, underscoring the growing depth of domestic markets.
India also received its third sovereign rating upgrade of the year, with Japan’s R&I raising the country to BBB+, following earlier upgrades by S&P and Morningstar DBRS, reaffirming confidence in India’s macro stability and reform momentum. However, the rupee weakened to an all-time low of ₹88.8 per USD, raising concerns about imported inflation, even as volatility remained subdued—the India VIX declined 7.7% to 10.73, suggesting market steadiness rather than panic.
Overall, September was a transitional month where structural reforms, rating upgrades, and resilient domestic inflows balanced out foreign selling and currency pressures, positioning India for medium-term growth despite near-term consolidation.
Sectoral performance
In September 2025, markets witnessed sharp sectoral divergence amid GST 2.0 rollout, $2.7 billion FPI outflows, and contrasting policy impacts. Metals led with a 9.4% surge on China’s demand rebound, safeguard duties, and strong global prices. Automobiles gained 5.8–11.7%, boosted by GST rate cuts, a 34% Navratri sales spike, and record exports. PSU banks outperformed as credit growth hit 12–13%, aided by infrastructure spending and an accommodative RBI stance, while overall banking rose a modest 0.7%. Industrials advanced 3.5% on defence and infra momentum, led by large caps.
Conversely, technology declined 1.5–5.3% on US visa fee hikes, weak client spends, and geopolitical delays. FMCG slipped up to 1.8% as GST changes deferred purchases and disrupted trade channels. Healthcare fell 1.6% amid FPI selling despite a 7.3% domestic pharma growth, while energy and oil & gas edged up 1.4% supported by fuel demand and partnerships despite higher GST rates.
Overall, September saw a clear policy-driven rotation—sectors linked to domestic demand and GST relief like metals and autos outperformed, while IT and FMCG lagged under global and transitional pressures.
In the following sections, we provide a more comprehensive examination, outlook and detailed insights of some major sectors:
Auto:
India’s auto industry had a landmark month in September 2025, with total sales touching 3.07 million units, reflecting strong demand recovery, GST 2.0 benefits, and record festive season momentum. The implementation of GST 2.0 reduced prices across key segments—small cars by 10–13%, two-wheelers by nearly 8%, and tractors by up to 7%, driving broad-based volume growth.
The passenger vehicle (PV) segment grew 5.8% year-on-year to 4.73 lakh units, led by robust SUV demand. Maruti Suzuki, Mahindra, and Tata Motors recorded exceptional performances, while electric PV sales nearly doubled (+96% YoY) to 9,191 units. Exports also remained strong, with Maruti achieving record overseas shipments of 42,204 units (+52% YoY).
The two-wheeler segment saw strong festive demand, with sales rising 8.2% YoY to 2.42 million units. Hero MotoCorp, Bajaj Auto, TVS, and Royal Enfield all reported healthy growth, supported by GST rate cuts, improved rural sentiment, and record footfalls during Navratri.
The commercial vehicle (CV) segment maintained steady recovery, clocking 1.76 lakh units, supported by infrastructure spending and demand for light and medium vehicles, though three-wheelers faced a mild contraction.
The EV segment continued to accelerate, with 1.86 lakh units sold, marking sharp growth across passenger, two-, and three-wheeler categories. EV penetration reached 7.6%, with strong leadership from Tata Motors, TVS, and Bajaj.
The auto sector is expected to sustain its growth momentum, aided by GST-driven affordability, festive tailwinds, and improving export traction. Growth projections have been revised upward—PV: 3–4%, 2W: 4–7.5%, CV: 5%, and tractors: 10%. The EV market is set for exponential expansion, targeting 30% penetration by 2030, backed by over $200 billion in investments and rapid charging infrastructure rollout.
While short-term challenges such as supply chain bottlenecks, low EV localization, and premium segment tax pressure persist, strong domestic demand, government incentives, and rising exports position India’s auto industry for sustained, broad-based growth through FY2026 and beyond.
Hospitality:
October is set to be another strong month for India’s hospitality sector, supported by festive travel, weddings, and year-end tourism, even as lingering monsoon impacts and supply constraints temper growth in select markets. September saw occupancy recover to 62–65% from a muted 58–60% in August, with Average Daily Rates (ADR) rising 10–12% YoY and RevPAR improving 8–10%. Bengaluru led with a 25–27% RevPAR surge in Q2 and maintained momentum into September. Branded hotel signings exceeded 100,000 keys YTD through August (58% in Tier 2/3 cities), though openings lagged at 8,291 keys, sustaining healthy occupancy levels.
Key drivers are the festive and wedding season, which has boosted advance bookings 15–20% month-on-month in destinations such as Goa, Udaipur, and Jaipur, with luxury rates already at ₹8,000–9,000 per night. Destination weddings are filling midscale and premium hotels to 70–75% occupancy for October–December. Corporate and MICE travel is also recovering, with events such as India Mobile Congress and the NASSCOM Product Conclave expected to lift weekday occupancy by 8–10%, while inbound tourism bookings are up 18% YoY, driven by strong demand from the US, UK, and UAE. Tier 2 destinations such as Kochi and Varanasi have seen international arrivals rise 22% YoY, lifting ADRs by 12–14%.
A persistent demand–supply gap underpins pricing power, with branded supply at just 138 rooms per million people versus domestic travel searches exceeding 141 million monthly in 2024. Luxury segment ARR is growing at a 10.6% CAGR through 2028, outpacing supply growth of 5.9%. Alternative lodging such as short-term rentals captured 30% of incremental leisure demand in September, particularly in hill stations and coastal areas.
Risks include possible monsoon resurgence affecting coastal demand, rising fuel costs impacting margins, and regulatory uncertainty over a proposed GST hike on serviced accommodation (18%→28%). Strategies that could outperform include expanding midscale and economy inventory in Tier 2/3 cities, enhancing non-room revenue streams (which accounted for nearly 50% of premium hotel revenues in Q2), leveraging dynamic pricing and direct booking incentives, and positioning around sustainability and wellness tourism, which is growing at a 15% CAGR.
Overall, October offers a robust backdrop for the hospitality sector, driven by strong festive-season travel, rising corporate and inbound demand, and enduring supply constraints. Operators with flexible supply models, diversified revenue streams, and targeted expansion in high-demand destinations are best placed to capitalise on these tailwinds.
Metals:
The metals sector showed mixed movement during the week, with ferrous metals under pressure due to weak demand, while non-ferrous metals strengthened on supply shortages and lower inventories.
In the ferrous segment, domestic HRC prices slipped 0.4% week-on-week to ₹48,500/tonne as buyers continued need-based purchases. Billet prices (Ex-Raipur) dropped 1.9% to ₹35,800/tonne amid slow downstream demand and falling finished steel prices. Chinese HRC declined 3.1% to ₹41,703/tonne following weak domestic consumption and tighter export checks. On the other hand, iron ore prices in Odisha rose 2.7% to ₹7,700/tonne due to lower supply from production and transport issues. Coking coal eased 1.8% to $163/tonne, slightly reducing input costs for steelmakers.
The non-ferrous segment stayed firm, supported by global supply issues and inventory drawdowns. Aluminium prices increased 1.7% to $2,721/tonne on supply disruptions in Guinea and lower Chinese output. Copper gained 2.2% to $10,613/tonne as supply tightened in Indonesia and Peru, further impacted by the US government shutdown. Zinc rose 2.4% to $3,055/tonne due to falling LME inventories, while Nickel and Lead moved up 1.1% and 0.8% respectively to $15,303/tonne and $1,965/tonne. Tin recorded the biggest jump, up 3.7% to $36,814/tonne on strong demand and limited supply.
Banking/Finance:
October is likely to be a month of consolidation for India’s BFSI sector, with steady credit demand balanced by margin pressure and mixed investor sentiment. In September, the BFSI index rose 0.71%, led by PSU banks where credit growth accelerated to 12–13% supported by government infrastructure spending and strong deposit mobilisation. Private banks underperformed due to selective corporate lending and intense competition for retail deposits. The RBI kept the repo rate unchanged at 5.50% on October 1, signalling policy stability but limiting margin expansion.
Non-food credit grew 9.9% YoY by late August, driven by robust retail loan demand and public capex. Net interest margins remain under pressure from earlier rate cuts and rising funding costs, especially for private lenders. Gross NPAs fell below 4%, although stress persists in commercial real estate and retail NBFC portfolios.
The RBI’s continued neutral stance and active liquidity management will be key to sustaining deposit growth. Digital banking remains a structural driver, with focus on asset tokenisation and broader Central Bank Digital Currency (e-rupee) adoption. Banks integrating these tools early stand to gain in fee income and customer engagement.
Q2 FY26 previews suggest strong results for SBI, Kotak Mahindra Bank, and RBL Bank on retail loan growth and lower credit costs, while IndusInd, Bandhan, and IDFC First may see muted performance due to higher provisions. Life insurance premiums are growing 11–13% YoY, while general insurance growth has slowed to mid-single digits. Mutual funds continue to attract healthy inflows, with SIP contributions exceeding ₹18,000 crore monthly.
Regulatory updates, including strengthened Basel norms and a revamped ECB framework, provide funding diversification but require tighter risk controls. Implementation of Expected Credit Loss provisioning and IFRS-based standards will affect near-term profitability.
Key risks are rising funding costs from potential global rate hikes, asset quality pressures in stressed sectors, and delays in CBDC and tokenisation rollout. On the investment front, large PSUs such as SBI and PNB, along with well-capitalised private banks like HDFC and Kotak, are preferred, alongside fintech and payments players leveraging CBDC platforms. Caution is advised for mid-tier lenders with high wholesale funding dependence and insurers facing margin pressures.
Overall, October will test the BFSI sector’s ability to balance growth and profitability in a low-rate, competitive environment. Banks with diversified income, strong balance sheets, and digital capabilities are best positioned to outperform in the evolving landscape.
Important events & updates
A few important events of the last month and upcoming ones are as below:
- In the MPC meet, the Reserve Bank of India kept the repo rate unchanged at 5.50%, citing balanced growth and inflation outlook. The central bank signaled a neutral stance and reiterated its commitment to liquidity management via variable reverse repo operations.
- In September 2025, HSBC India’s Manufacturing PMI was revised down to 57.7 from an earlier estimate of 58.5, following August’s 17½-year peak of 59.3.
- HSBC India’s Composite PMI fell to 61.0 in September 2025, below estimates and August’s 63.2, marking its lowest since June and signalling slower growth across manufacturing and services.
- HSBC India’s Services PMI was revised to 60.9 in September 2025, down from 61.6 and August’s 62.9, reflecting slower growth in new business and overall activity.
- Consumer Price Index (CPI) inflation for September is due on October 12. We expect a slight uptick, driven by rising urban food prices and higher fuel levies.
Fundamental outlook:
The Indian economy at the start of October presents a robust health. The RBI, in its early October monetary policy meeting, upwardly revised its GDP growth forecast for the fiscal year 2025-26 to 6.8% from an earlier estimate of 6.5%. This optimism is fueled by strong domestic demand, healthy investment and consumption patterns, and a promising agricultural sector outlook. The real GDP growth for the first quarter of FY 2025-26 stood at an impressive 7.8%, the highest in seven quarters.
On the price front, inflation has remained largely benign. The RBI has lowered its CPI inflation forecast for FY 2025-26 to 2.6%, well within its comfort zone. After a nine-month decline, headline CPI inflation reached an eight-year low of 1.6% in July 2025 before a slight uptick to 2.1% in August. Projections for September suggest a further easing to around 1.2% to 1.8%, primarily due to a significant drop in food prices. This favorable inflation trajectory has allowed the RBI to maintain the repo rate at 5.50% with a neutral stance, providing continued support to economic growth.
The external sector appears stable, with the current account deficit narrowing to 0.2% of GDP in the first quarter of FY 2025-26. Strong services exports and robust private remittances have contributed to this positive development. However, there could be a potential widening of the current account deficit to around 1.2% of GDP for the full fiscal year, contingent on global commodity prices and trade dynamics.
The government’s fiscal deficit target for FY 2025-26 is pegged at 4.4% of GDP. While there are some concerns about meeting this ambitious target due to increased government spending and potentially slower tax collections, the overall fiscal situation is being closely monitored.
Corporate earnings for the Nifty 50 are projected to grow by approximately 9% in FY26. While this is a moderation from previous years, a potential surge to 18% is anticipated in FY27, led by the consumption and banking sectors.
A key factor influencing market sentiment is the divergence in investment patterns between Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). FIIs have been net sellers in the Indian market in 2025, pulling out a record $18 billion. This is attributed to global uncertainties and a shift towards more attractively valued markets. In stark contrast, DIIs have shown immense confidence in the domestic growth story, with record inflows cushioning the market from significant downturns.
Technical outlook.
The Indian equity market is in a consolidation phase within an overall bullish structure. The Nifty closed September near 25,050 and currently trades above its 100- and 200-day exponential moving averages, affirming the primary uptrend. The 20-day EMA, positioned near 25,100, acts as a dynamic pivot. Short-term momentum indicators such as the 14-day RSI (~52) and the MACD histogram (near zero) suggest range-bound movement, requiring fresh triggers to push the market decisively higher or lower. Key technical levels to watch are primary resistance at 25,500 and support at 24,750, major resistance is around 26000 and support at 24500.
Volatility remains low, with the India VIX around 10–11, indicating orderly price action. Market breadth is mildly supportive, with advance–decline ratios hovering near 1.1. High-frequency data point to sustained but moderating expansion — Manufacturing PMI eased to ~57.0 and Services PMI to ~60.5, while the Composite PMI remains in the low-60s, showing broad-based strength. GST e-way bill volumes rose ~18% YoY in early October, and interstate movements surged ~20% YoY, signalling healthy festive demand and supply-chain normalisation.
Demand indicators remain firm, with daily electricity consumption up ~5% YoY in September and bank credit growth steady at ~10% YoY (non-food credit at ~9.8%). These trends underline underlying economic momentum heading into the festive season. On flows, DIIs have been offsetting modest FII outflows, while the INR has stabilised near 88.00/USD, helping cushion imported commodity costs.
Given low volatility and neutral oscillators, the Nifty is likely to trade in a 25,000–25,500 range through October. A sustained move above 25,500 would strengthen the medium-term uptrend, while a break below 25,000 could trigger deeper corrections toward 24,750.
Outlook for the Global Market
US Market:
U.S. equities have surged to new highs, driven by resilient consumer spending and strong AI-led corporate investments, even as underlying macro signals flash caution. Real GDP is estimated to have grown 3.5% in Q3 2025, maintaining momentum from Q2. However, growth is expected to moderate to 2.0% in 2025 and 2.3% in 2026, as higher financing costs, trade disruptions, and policy uncertainty begin to weigh on activity.
Consumer demand remains a key pillar of strength, with personal consumption expenditures rising 3.0% (annualized) in Q3, supported by revisions showing firmer income data. Yet, real disposable income growth is sluggish at 1.9% YoY, and household debt costs are rising. Business investment continues to benefit from AI and high-tech spending, but traditional sectors like commercial real estate and manufacturing show contraction, with nonresidential structures investment falling for six straight quarters.
The labour market is losing momentum. Alternative data suggest job gains averaging only 50K per month, with the unemployment rate projected to rise to 4.5% by year-end. Core inflation remains sticky, with the PCE deflator up 2.9% YoY in August and expected to stay near 3.0% through early 2026, driven by tariff-related cost pressures.
The ongoing federal government shutdown has delayed key data releases, amplifying uncertainty. Nevertheless, the Fed is expected to cut rates by 25 bps in both October and December, followed by two more in H1 2026, lowering the policy rate to 3.00–3.25%. The yield on the 10-year Treasury is forecast around 4.0% by year-end, while mortgage rates hover near 6.3%, keeping housing subdued.
The U.S. economy remains resilient but increasingly fragile beneath the surface. Slowing job growth, stubborn inflation, and fiscal uncertainty point to softer fundamentals even as markets hit new highs. A cautious stance is advisable, diversifying away from AI focused companies looks prudent.
Outlook for Gold
Gold continues to command strong buying interest, with investors maintaining a buy-on-dips approach amid an extended uptrend. Prices are hovering near USD 4,060/oz, close to record highs, supported by demand stemming from geopolitical tensions, a potential U.S. government shutdown, and global market uncertainty. The USD Index (DXY) has rebounded toward 99, yet both gold and the dollar remain resilient highlighting strong safe-haven flows.
From a technical perspective, the USD 4,000 level has emerged as a key psychological support zone. Sustained trading above this level could keep the bullish momentum intact, while a decisive breach below may trigger corrections toward USD 3,800 and deeper retracement targets around USD 3,500, 3,200, and 2,900 aligned with major Fibonacci retracement levels and long-term trendlines dating back to 1980. Conversely, a sustained move above USD 4,080 could push prices higher by another 100 points, extending the ongoing rally.
However, the monthly momentum indicator at 92 signals a highly overbought market the strongest reading on record suggesting that a technical pullback is overdue. While central bank purchases and geopolitical uncertainty continue to lend support, short-term profit-taking could cause volatility. The rally since mid-August, which has added nearly USD 1,000 in less than two months, appears stretched.
In the broader picture, gold’s breakout above its multi-decade contracting price structure indicates a powerful long-term uptrend, but history suggests that a corrective phase could occur before the next leg higher resumes. Investors may therefore look to accumulate on declines, rather than chase current highs, maintaining a cautious yet constructive stance.
Overall, while gold remains on fire amid strong haven inflows and persistent macro risks, the risk–reward has turned less favourable in the near term. A measured approach focusing on staggered allocations on dips remains prudent as momentum normalises from overheated levels.
What should Investors do?
Indian equities are in a cautiously optimistic phase, with the market consolidating after a strong run-up in the past few months. The Nifty has been trading in a tight range around the 25,000 mark, reflecting healthy profit-taking and sectoral rotation rather than a change in trend. Overall sentiment remains supported by a stable macro environment, improving foreign inflows, and expectations of steady earnings growth through the second half of FY26.
After witnessing heavy outflows earlier in the year, foreign institutional investors (FIIs) have turned net buyers for three straight sessions in October, marking a clear shift in sentiment and providing much-needed support to the market. On the earnings front, Q2 FY26 results are likely to show modest growth of around 6–8% year-on-year, led by strength in Oil & Gas, NBFCs, Cement, and Metals, while banking may continue to face pressure on profitability.
On the macro side, the RBI’s dovish stance—with the repo rate maintained at 5.5%—remains a key support for market sentiment. Inflation has stayed well below the 4% target, creating room for a possible rate cut in December, while easing global tensions and constructive developments in US-India trade ties further improve the external backdrop.
Sectorally, we expect Metals, IT, Pharma, and PSU Banks to perform relatively better, supported by policy momentum, defensive positioning, and improved earnings visibility. Private Banks and Consumer Durables, however, may remain subdued due to asset quality issues and uneven consumer demand. The upcoming Q2 results from major corporates such as Wipro, ITC, HUL, Maruti Suzuki, and JSW Steel will be crucial in determining the near-term trend.
In our view, markets are likely to remain range-bound in the near term with slight positive bias, consolidating recent gains before the next leg of the rally. The medium-term outlook stays constructive, supported by improving earnings momentum, sustained domestic inflows, and macro stability. Structurally, Indian equities continue to offer a positive long-term opportunity, backed by resilient growth, fiscal prudence, and strong domestic demand.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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