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Below the Quote on Monthly Equity Outlook by Vinay Paharia, CIO, PGIM India Mutual Fund

Markets have been in consolidation mode in recent times. Rich valuation, earnings downgrades, geopolitical uncertainties have been the key headwinds. Indian economy is also seeing some slowdown; however, it would be amongst the fastest growing large economies in the world.

Government has been taking proactive steps to counter this slowdown – i) Income tax rate/slabs rationalisation, ii) GST rate cuts, iii) Ban on real money gaming; these should provide some impetus to disposable incomes. Apart from this, lowering of interest rates, impact of 8th pay commission etc. should also provide some boost to the economy.

External sector is expected to be volatile: Tariff rates, trade deficits (considering crude sourcing, precious metals), issues with IT exports in light of visa issues, rise of GCCs etc. stand to make things non-linear. Capital Market activity: FIIs continue to be net sellers. Plethora of IPOs/fund raising/stake trimming by promoters/PE players happening. Domestic Institutions + Retail have been absorbing liquidity.

Overall fabric of the market remains constructive for growth + quality investing for the long term. Preferred sector plays are more domestic oriented: Consumption, Domestic Financials, India Healthcare, Telecom. Cautious/Negative on I.T, deep cyclicals, Energy and Utilities.

October 2025          

The Nifty gained 4.5% in the month, supported by: (1) robust festive demand, (2) easing global trade tensions and (3) decent 2QFY26 earnings. Mid and small-cap indices were up 5.8% and 4.7%, respectively. All sectoral indices ended higher. The Realty, IT and Oil & Gas sectors were up 9%, 7% and 6%, respectively.

Key developments: (1) The RBI MPC unanimously kept the policy repo rate unchanged at 5.5%, while maintaining the stance at neutral, (2) IMF revised India’s FY2026 GDP growth forecast to 6.6% from 6.4%, (3) Securities and Exchange Board of India (SEBI) has published a consultation paper aimed at areas such as fee transparency and protection for the mutual fund industry, (4)  SEBI extended its deadline for changes in bank indices used for derivatives trading, (5) The 2QFY26 net income of the Nifty- 50 Index came in largely in line with our expectations; net income for Nifty-50 companies, which reported results so far, grew 3.1% YoY and (6) India’s primary market witnessed its highest-ever IPO activity in a single month; in October, there were 10 IPOs raising $5 bn. On the earnings front, as of October 31, 2025, 27 stocks from the Nifty50 Index had reported their Q2FY26 earnings. On a cumulative basis, these companies have reported a Sales/EBITDA/PBT/PAT growth of 9%/8%/5%/5% YoY, respectively.

For the month, FPIs bought $2 bn (until October 30) of Indian equities in the secondary market, whereas DIIs bought $5.9 bn (until October 31). On the economy front, CPI inflation moderated to 1.5% in September on the back of food price contraction, while core inflation firmed up to 4.5% due to a sharp uptrend in bullion prices. WPI inflation cooled to 0.13% in September from 0.52% in August. IIP growth in September declined to 4% as against 4.1% in August.

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