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Informist, Tuesday, Oct. 7, 2025

 

By Anjana Therese Antony

 

MUMBAI – The Indian equity market is expected to see another month of muted gains in October amid high valuations. However, a likely better earnings season and the prospects of a trade deal between India and the US will possibly cushion the market from major negatives, analysts and market participants said. What could also support the near-term bullish sentiment is the persistent domestic inflow despite the selling pressure from foreign investors, they said. 

 

It is still too early to believe that the worst is behind us with respect to US tariffs, research analysts said, adding that the lower possibility of a market correction is making it difficult for investors to achieve better returns, as valuations remain expensive. The benchmark indices are also unlikely to reclaim their record high this month. 

 

However, there are hopes that the cycle of earnings downgrades has peaked and that broking firms will possibly start upgrading their estimates, especially on the back of a likely boost from the government's goods and services tax cut, which came into effect in September. "I think the market has sustained quite well and government policies have been very conducive to supporting the market," Vinit Bolinjkar, head of research at Ventura Securities, said. "Barring some apocalyptic event in the global markets, the domestic market is very resilient."

 

The benchmark Nifty 50 is expected to find resistance at 25400 points, according to the median of estimates from 10 broking firms polled by Informist. This is 1% higher than the index's closing level of 25108.30 points Tuesday, but still 3% lower than the record high of 26277.35 points it had hit in September last year. Of the 10 broking firms, only two gave 26000 level as resistance for the Nifty 50, which is still a percentage lower than the all-time high. 

 

The index rose 0.8% on month in September after falling in the previous two months. It has risen 4% in the first nine months of 2025, which is far lower than the nearly 20% growth it had marked in the year-ago nine months and significantly lower than the double-digit growth posted by some markets in Asia and Europe. 

 

The support for the 50-stock index is seen at 24400 points, as per the median of estimates from brokerages. This is almost 3% lower than the spot level and 7% down from the record high. In a worst-case scenario, Bolinjkar of Ventura Securities expects the market to decline by up to 5% from the current level. 

 

EARNINGS

With the earnings season kicking off this week, all eyes will turn to the results and management commentary on demand trends and the business outlook, research analysts said. "Returns should be better in 2026 than in 2025. Market should largely deliver in line with earnings growth," Pankaj Pandey, head of research at ICICI Securities, said. Pandey expects the earnings growth of the overall Nifty 50 companies to be 8% in 2025-26 (Apr-Mar) and 14% in FY27. The equity research heads of four broking firms that Informist spoke to expect Nifty 50 companies' FY26 earnings to grow between 8% and 12%. 

 

Index heavyweight banking and financial services are likely to see slight selling pressure in the near term, as their valuations are not cheap. The pressure on net interest margins and deterioration in asset quality could weigh on these share prices in the near term. 

 

Pandey of ICICI Securities said the auto sector will likely see earnings upgrades after the results are released, as growth at the beginning of the ongoing festive season was robust. "If this (growth) continues till Diwali, we will have to upgrade the numbers... Auto sector was sitting on an expectation of single-digit growth," he said. 

 

In September, total automobile retail sales grew 5% on year to 1.83 million units, according to data from the Federation of Automobile Dealers Associations released Tuesday. This is better than the 3% on-year rise posted in August and 4% on-year fall reported in July. The federation said that most of the growth in the latest month occurred in the final week, as customers who had postponed their car or two-wheeler purchases due to the GST cuts from Sept. 22 decided to make purchases after the rate cuts took effect. 

 

Analysts are also slightly optimistic about consumer goods stocks, expecting better volume growth driven by the GST cuts. While the latest quarter earnings are unlikely to throw up any major surprises, market experts believe that the next few quarters may show better growth numbers. 

 

Information technology companies, the early birds of the earnings season, are likely to post another quarter of muted growth and are expected to hardly "move the needle" on earnings. While valuations of large-caps remain reasonable and mid-caps are expensive, the latter group is expected to continue outperforming its larger peers in terms of earnings growth. Management comments about the outlook and deal conversions amid concerns about the US administration's policies — particularly trade, tariffs, and visas — will be closely watched. 

 

FIIs, DIIs

While Indian equities remained "resilient" during the onslaught of tariffs, experts worry that the stock market is unable to undergo a correction to reach reasonable levels because of significant inflows from domestic mutual funds. There are also worries that returns from the market may remain muted in the medium term. The Nifty 50 is trading around 22–23 times its one-year forward price-to-earnings, which is higher than the historical average of around 20-21, analysts said. 

 

Meanwhile, due to the significant domestic inflows, market participants also said they are not too worried about the outflow of foreign investments. "I think more domestic money will keep coming to the Indian market because interest rates are coming down and investors are getting much more mature about what to expect from the equity market," Bolinjkar of Ventura Securities said.  

 

While foreign investors and private equity funds continued their selling spree for the third consecutive month in September, domestic investors remained net buyers. In September alone, FIIs net sold equities worth more than INR 330 billion while domestic investors net bought shares worth over INR 620 billion. In the first nine months of FY26, FIIs net offloaded equities worth INR 2.5 trillion and domestic investors net purchased almost INR 6 trillion worth of shares. 

 

DERIVATIVES

The fall in trading volume in the derivatives segment has "somewhat" eased volatility in the cash market on expiry days, analysts said. The Securities and Exchange Board of India has been taking measures to reduce the retail participation in futures and options due to the significant losses made by these investors.

 

Due to the closure of various derivatives expiries, the number of contracts traded declined to nearly 3 billion in September this year from 12.50 billion contracts in October 2024, Raj Deepak Sing, derivatives analyst at ICICI Securities, said. 

 

In October 2024, the market regulator announced stringent measures for the derivatives segment, including limiting weekly expiry contracts to only one benchmark index per exchange and requiring upfront premium collection from index option buyers. Derivatives analysts said the market regulator will continue to adopt measures to bring down the overall derivative volumes. Experts have been raising concerns about the significantly higher derivatives trading volume on expiry days when compared with the cash market volume, calling it "unhealthy". 

 

Following are the support and resistance levels for the Nifty 50 index for October based on responses from 10 brokerages:

Broking Firm	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	24400	--	25500	--
Axis Securities	24280	23965	--	25050
Globe Capital Market	24335	23950	--	25250
HDFC Securities	24150	--	25400	--
IDBI Capital Markets & Securities	24500	--	25500	26000
LKP Securities	24900	--	25250	25800
NVS Brokerage	24544	24200	--	25300
Religare Broking	23800	--	25700	--
StoxBox	24400	24000	25400	25650
Chola Securities	24400	23500	25500	26000
Median	24400		25400

 

End

 

With inputs from Team Informist

Edited by Saji George Titus

 

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