Market Performance

The Sensex gained 562.63 points, or 0.78%, to close at 72,472.33. The Nifty 50 added 98.50 points, or 0.44%, to end at 22,520.45. The weekly figures hide a volatile path: two strong sessions, a sharp mid-week reversal and a late recovery.

Monday's rally ended a four-session slide in which the Sensex and Nifty had lost 2.69% and 3.11%. It was helped by lower crude prices, a softer US jobs print and broad buying. Tuesday extended the gains as global cues improved and companies began releasing encouraging quarterly updates. By then the two indices were up about 1.6% over two sessions.

The tone turned on Wednesday, when the RBI announced its rate hike. Thursday brought the week's sharpest selloff, as crude prices rose again and global sentiment weakened. Both benchmarks fell to their lowest levels in 18 months. According to market commentary, foreign investors sold shares worth more than Rs 20,000 crore over two sessions as the US 10-year Treasury yield rose to about 5.34%, its highest since 2002. On that day only IT and private bank stocks held up, while autos and metals fell the most. Friday's rebound, helped by cooler crude and better global sentiment, recovered most of the damage.

RBI Raises Rates for the First Time in Nearly Three Years

The Monetary Policy Committee voted unanimously after its 5-7 October meeting to raise the repo rate by 25 basis points to 5.50% from 5.25%. This was the first increase in almost three years. The rate rise was widely expected, so the surprise lay in the stance, which moved from neutral to calibrated tightening. That language tells markets the committee sees further tightening as a live option, and it explains why Wednesday's reaction was negative even though the move itself was priced in. The Standing Deposit Facility rate went up to 5.25%, and the MSF rate and bank rate stand at 5.75%.

The accompanying growth assessment was more upbeat than the rate decision. The RBI put Q1 FY27 real GDP growth at 7.8%, citing private consumption, fixed investment, a recovery in merchandise exports and steady services exports. It raised its FY27 growth forecast to 7.1% from 6.7% in August, and lifted its Q2 and Q3 projections to 7.2% and 6.9% from 6.4% and 6.5%. The message is that the central bank is tightening from a position of economic strength, with energy prices and imported inflation the main concern. For banks, higher policy rates could support lending yields over time, but they also raise funding costs and put pressure on bond portfolios. Rate-sensitive sectors such as real estate and autos face higher financing costs.

The Domestic Economy: Resilient, but Uneven

External forecasters share the RBI's view. The World Bank raised its India FY27 growth forecast to 7.1% from 6.6%, citing resilient domestic demand, with investment and exports each growing about 12% in Q1 FY27. It also lifted its 2026 South Asia forecast to 6.9% from 6.3%, while cutting the forecast for the region excluding India to 3.6% from 4.1%. It named higher energy prices and El Niño as key risks.

High-frequency data gave a similar picture. The HSBC India Services PMI Business Activity Index rose to 55.2 in September from 54.1 in August, its best reading since June. Input-cost pressures eased to a 10-month low, and service providers' expectations for future activity improved for a second month. The PMI survey, however, noted that average growth in the September quarter was the weakest since early 2022, and export demand grew only slowly. Moneycontrol's Advance Business Index rose to 102.8 from 101.1, helped by manufacturing and services sentiment, vehicle sales and coal output. Softer hiring growth and a contraction in credit card spending point to pockets of strain.

Gross GST collections rose 14.7% year-on-year to Rs 2.04 lakh crore in September, a sign that tax buoyancy remains firm. India's foreign exchange reserves fell $12.95 billion to $734.61 billion in the week ended 2 October. The data do not explain the fall, but a drawdown of this size during a period of heavy foreign selling and rising US yields is consistent with currency management or valuation effects. It is worth watching alongside rupee movements.

Energy, Power and Policy Measures

Crude oil above $100 a barrel is the central risk for India's inflation, import bill and current account. A Mint analysis this week argued that prolonged oil shocks have not always meant stock market crashes, noting that equities have rallied through such periods when domestic growth, liquidity and earnings held up. That argument fits the week's pattern, in which the market rose on days when crude eased and fell when it climbed.

The government adjusted several levers. It cut windfall taxes on diesel to Rs 16 per litre from Rs 20, and on aviation turbine fuel to Rs 10.5 per litre from Rs 15. The sugar stock-holding period was shortened to 15 days from 30 days, with a limit of 1,000 quintals from 15 October to 30 November, to curb speculation before the festive season. On power, the government said daily coal supplies to the sector were up 36% from September lows and stock depletion had slowed. Stock rebuilding has not started, so the power-shortage risk it was addressing has not fully gone away.

Corporate Earnings and Business Updates

The September-quarter season began with results from GM Breweries and Tata Consultancy Services. Business updates from consumer companies were more telling, and the market punished or rewarded stocks on the quality of growth rather than the headline number.

TCS reported constant-currency revenue growth of just 0.5% quarter-on-quarter, but it held an operating margin of 24% and a net margin of 19%. Total contract value was $9.6 billion, marginally above Q1's $9.5 billion but well below the $12 billion of Q4 FY26. The stock's rise looks driven by margin resilience and the company's statement that the US suspension of PERM green-card filings should not affect its workforce plans or client work. TCS declared a dividend of Rs 12 per share, with a record date of 14 October and payment on 30 October.

Trent's 13% jump reflects growth well ahead of the sector. First-half revenue rose 21% to Rs 11,454 crore, Zudio crossed 1,000 stores, and the group's portfolio reached 1,342 stores. Titan's fall shows the opposite dynamic. Its overall consumer growth of 25% was strong, but jewellery growth slowed from 39% in Q1 to about 21%, and investors reacted to the deceleration. Kalyan, by contrast, reported same-store sales growth of about 20% in India against a high base from last year's strong Navratri sales. Raymond Realty's pre-sales doubling suggests housing demand has so far absorbed the weaker rate environment, though higher borrowing costs could test that.

The Immigration Shock for IT

The US administration suspended Microsoft and seven other IT companies, including Infosys, TCS and Wipro, from filing new applications under the PERM green-card programme. In the near term the move creates uncertainty for sponsorship of Indian employees in the US. Some analysts argue it could work in India's favour over time, with more roles and global capability centres moving to the country. IT stocks outperformed on Thursday's weak day. The effect on hiring and delivery models is still unclear, and further US policy steps will determine how it plays out.

Global Cues

In the US, September nonfarm payrolls rose by just 29,000 against expectations of 90,000. The unemployment rate rose to 4.2% from 4.1%, and payroll gains for July and August were revised down by a combined 60,000. According to CME FedWatch, the probability of a 25-basis-point Fed hike at the end of October fell to 22.7% from 24.4% in the previous session and 64.2% a week earlier. The minutes of the Fed's September meeting showed all 19 policymakers backed that month's rate hike, and most expected another increase to be appropriate by year-end, though they differed on the inflation outlook. The US trade deficit widened to $105.6 billion in August, up 13.7% and the largest since March 2025, as record imports included crude oil and semiconductors.

The US yield backdrop is the main concern for emerging-market flows. Goldman Sachs Research noted the 10-year Treasury yield touched 5.3%, and a Goldman client survey (30 September-2 October) found half of 501 respondents expect yields to rise further, against 36% who expect a fall. Goldman's asset allocation team said shorter- and medium-maturity government debt offers better value than long bonds because of duration risk.

Elsewhere, euro-area business activity improved. The Services PMI rose to 53.0 and the Composite PMI to 53.1, the highest since April 2023, while euro-area and EU producer prices rose 1.9% month-on-month in August. In the UK, the Composite PMI slipped to 52.0 from 52.5. In Asia, Japan's Services PMI fell to 51.3 from 52.5, and Singapore's retail sales declined 1.0% month-on-month. Philippine inflation accelerated to 7.2% from 6.1%, a reminder of how energy costs are feeding into prices across the region.

Primary Market and Corporate Funding

The IPO market stayed active despite the weak equity backdrop. Companies raised a record $12.5 billion in the first nine months of 2026 even as the Nifty fell about 14%, according to Moneycontrol. Moneyview listed on NSE at Rs 55, a 61.76% premium to its issue price, and closed 57% higher.

The pipeline grew. SEBI cleared a Rs 1,000 crore IPO from Swara Baby Products (a fresh issue of Rs 500 crore plus an offer for sale of Rs 500 crore), and also approved Carlsberg India, TMC Transformer (India) and two other companies. Inox Clean Energy filed draft papers for an IPO of Rs 8,000 crore fresh issue and Rs 2,000 crore offer for sale, which would make it one of the larger issues in the pipeline.

On the debt side, Reliance raised about Rs 13,009 crore through 10-year unsecured NCDs at 7.90%, maturing in October 2036. Bajaj Finance raised Rs 510.86 crore through secured NCDs at 7.78%, maturing in November 2029.

Other Corporate Announcements

• Kotak Mahindra Bank: RBI approved Anup Kumar Saha as MD and CEO for three years from January 2027, subject to board and shareholder approvals.

• ICICI Bank: Received a GST show-cause notice of Rs 229.14 crore, excluding interest and penalty.

• Adani Ports: Inaugurated the $750 million Phase II of the Colombo West International Terminal, doubling its container-handling capacity.

• Adani Green: Added 481.9 MW of solar and wind capacity and 3,081 MWh of battery storage in Gujarat, taking total storage to 6,632 MWh.

• Power Grid: Fully commissioned the transmission system for the 2,500 MW Bidar solar energy zone in Karnataka.

• Lupin: Received USFDA approval for a Vitamin K injection, with an estimated US market of about $52.3 million a year.

• Varun Beverages: The Rs 13.15 crore acquisition of South Africa's Crickley Dairy was cancelled after a condition was not met.

Investor Strategy : Hold the Line, Stay Diversified

With indices well off their highs, fund managers urged patience. ICICI Prudential AMC's Sankaran Naren advised investors to diversify across asset classes, look beyond recent winners and avoid exiting during volatile phases. Prashant Jain said two years of underperformance have reset valuations, that Indian equities could deliver 40-50% returns over three years, and that foreign selling could ease by mid-December. These are opinions, not forecasts the data can confirm, and they depend on oil, US yields and flows turning favourable.

What to Watch Next Week

• Earnings: The September-quarter season will broaden after TCS and GM Breweries. Investors should check exchange filings for confirmed dates of large-cap results, especially banks and IT, and watch whether Titan's jewellery slowdown or Trent and Kalyan's strength shows up elsewhere in discretionary spending.

• Domestic data: Monthly inflation and trade data are normally released in mid-month. Confirm exact dates on MOSPI and Commerce Ministry calendars. Weekly forex reserves are due on Friday.

• RBI and policy: Watch for banks' deposit and lending-rate responses to the hike, and for any RBI commentary on liquidity and the rupee.

• Corporate actions: TCS's record date for its Rs 12 dividend is 14 October, and the sugar stock-holding limits begin on 15 October.

• IPOs: Follow announcements on Swara Baby Products, Inox Clean Energy, Carlsberg India and TMC Transformer, and the post-listing performance of Moneyview.

• Global: US Treasury yields near the 5.3% level, the probability of a Fed hike at the late-October meeting, and Middle East tensions that drive crude. Brent and other crude benchmarks above $100 are the biggest external risk.

• Market factors: FII selling pace after the Rs 20,000 crore outflow over two sessions, and whether the Nifty holds above Thursday's low of 22,231.80.