Global Macro Developments: As expected, the Fed cut interest rates by 25 basis points at its October 28–29 FOMC meeting, lowering the fed funds target range to 3.75%–4.00%, marking its second reduction in 2025 following September’s cut. The decision reflected a cooling labor market and inflation approaching the 2% target, though Fed Chair Jerome Powell maintained a cautious outlook. Meanwhile, the U.S. entered a federal funding shutdown on October 1, which persisted through the month, becoming the second-longest in history at 31 days. In contrast, the ECB kept policy unchanged at its late-October meeting, maintaining the deposit rate at 2.00% for the third consecutive time, with President Christine Lagarde signaling that eurozone rates are likely at their peak and will remain elevated as needed to control inflation.

Global Equities: Global equities surged in October, extending year-to-date gains as investor optimism grew over potential monetary easing and solid corporate earnings. The S&P 500 rose about 3.4% and the Nasdaq 100 gained roughly 5%, both closing at record highs amid strong Big Tech results. European markets advanced around 2–3%, led by industrial and consumer stocks, while Japan’s Nikkei 225 soared 16.6%—its best monthly performance since 1994—driven by a tech rally and a weaker yen following the Bank of Japan’s continued dovish stance. Emerging market equities posted modest 1–2% gains overall, though results varied: Chinese shares lagged due to property-sector strains, whereas Brazil and South Africa benefited from favorable commodity trends.

Commodities: Crude oil prices declined sharply in October, erasing September’s gains and marking a third straight monthly drop. Brent crude fell about 7% over the month, sliding from roughly $70 per barrel to around $65 by the end of October, while WTI settled near $61.5. The downturn reflected concerns of oversupply and weakening demand, as additional production from non-OPEC countries—and possible OPEC quota breaches—offset the impact of OPEC+ cuts. A stronger U.S. dollar and the economic drag from the U.S. government shutdown further pressured prices. Although U.S. sanctions on Russian oil briefly lifted prices mid-month, the market ultimately focused on the risk of a supply glut heading into year-end.

India Macro Developments: India’s high-frequency indicators point to ongoing growth momentum, though at a slightly moderated pace. The composite PMI remained in expansion around 58 in September, down from 60+ in August, while the services PMI, following a record 62.9 in August, stayed in the high 50s, supported by strong demand in finance, technology, and hospitality. Inflation has fallen sharply, giving India a macroeconomic advantage, and the RBI kept the repo rate at 6.50% with a clear dovish stance. The MPC highlighted that persistent disinflation could allow room to support growth, signaling an easing bias. Additionally, the RBI had earlier cut the Cash Reserve Ratio by 50 bps to inject liquidity ahead of the festival season, ensuring easy credit conditions.

Indian Equities: Indian equities staged a sharp rebound in October, outperforming global markets after two months of relative weakness. The Nifty 50 rose about 5.2% month-on-month, climbing from roughly 24,610 at the end of September to around 25,750 by October 31, with mid- and small-cap indices also gaining about 5–6%. The rally was broad-based, lifting the Nifty to new interim highs above 26,000 mid-month and bringing its one-year performance back to flat after earlier losses. Cyclical and rate-sensitive sectors drove the advance: Oil & Gas stocks surged as easing crude prices supported refiners and fuel marketers, while Metals and Mining benefited from hopes of stronger Chinese demand and a weaker dollar. Banks and Financials rose around 4% on strong credit growth and lower bond yields, though some late-month profit-taking trimmed gains. IT and FMCG posted modest 2–3% increases, whereas Healthcare, Pharma, and Auto shares were mixed to slightly weaker.

Currency Movements: The Indian rupee steadied in October after a volatile start to the month, when it briefly weakened past ₹88.50 per USD and touched an intraday record low near ₹89 amid global risk concerns. Mid-month, the RBI’s active intervention and a pickup in foreign portfolio inflows helped restore stability. By the end of October, the rupee was trading around ₹88.7 per USD—virtually unchanged from September’s ₹88.8 level—and remained broadly flat on a trade-weighted basis. Additionally, the U.S. Fed’s rate cut eased dollar strength, providing some support to emerging market currencies, including the INR.

Bond Yields: Indian government bond yields were largely steady in October, ending the month close to their late-September levels despite some intra-month fluctuations. The benchmark 10-year G-sec yield started near 6.55% and eased to around 6.48% by mid-month—its lowest in three weeks—supported by dovish RBI commentary and softer inflation data that fueled rate-cut expectations. However, yields inched higher toward the end of the month, with the 10-year closing around 6.53– 6.55% on October 31, nearly unchanged from 6.57% in September. The late-month uptick reflected a global rise in yields after the U.S. Fed’s cautious tone signaled fewer rate cuts ahead, leading to mild profit-taking in Indian bonds.

CPI: Headline CPI for September 2025 fell sharply to 1.54% YoY, down from 2.07% in August, marking the lowest inflation print in over eight years and dipping below the RBI’s 2% lower bound for the second time in the current fiscal year. The decline was driven largely by food deflation, with the Consumer Food Price Index down –1.37% YoY, as vegetable prices fell 21%, pulses 15%, and spices also eased amid improved supply. Base effects further supported the disinflation trend. Core inflation, excluding food and fuel, remained stickier at around 4.5% in September (up from 4.1% in August), reflecting persistent price pressures in certain services and gold, though it is near multi-year lows when gold is excluded.

Trade: In September 2025, India’s merchandise exports rose about 6.1% YoY to USD 36.38 billion, while imports grew faster at roughly 16.7% YoY to USD 68.53 billion, widening the trade deficit to USD 32.15 billion. The surge in imports was driven largely by gold and energy commodities, whereas export growth remained modest, reflecting global demand pressures. The widening deficit highlights external-sector headwinds and could weigh on the currency and current account unless offset by strong services exports or capital inflows.

FIIs turned into net buyers with a buying of $2.1bn (vs outflow of $2.1bn in Sep). The shift was driven by optimism regarding an India-US trade deal, stable 2QFY26 earnings and improving macro momentum. FIIs continued to buy in the bond markets with an inflow of $1.9bn, following a $1.2bn buying seen in Sep. DIIs remained net buyers for the 27th consecutive month, with strong inflows of $6.0bn in Oct (vs. inflows of $7.4bn in Sep). Mutual funds were net buyers with inflows of +$2.3n (vs $5.3bn in Sep). Insurance funds were also net buyers, with inflows of +$3.7bn (vs+$2.1bn in Sep). Retail intensified their selling with outflows of $1.8bn (vs $0.2bn in Sep).