September 2025 Market Wrap: FIIs Exit, Inflation Cools, IPO Buzz Builds

Written by Jainam Resources

Last Updated on: October 9, 2025

September 2025 presented a mixed picture for Indian equity markets. While macroeconomic data signaled stability—with inflation easing and the RBI holding interest rates steady—foreign institutional investors (FIIs) continued to exit the market. Sectoral divergence, profit booking in heavyweights, and global headwinds capped any strong rally during the month.

This monthly review analyses index movements, sector trends, macro indicators, and primary market activity to help traders and investors understand the broader market dynamics.

Index Performance: Broad-Based Correction, Yet Medium-Term Gains Hold

Indian equity indices witnessed a corrective phase in the past quarter. The Nifty 50 declined by 3.24% in the last three months. Other major indices, such as Nifty 500 (-3.56%), Nifty 200 (-3.38%), and Nifty 100 (-2.98%), also ended lower.

Smaller segments underperformed more sharply. The Nifty Small 100 corrected by 7.88%, and Midcap indices dropped over 5%, reflecting volatility in broader markets. However, six-month returns remained strong, with the Nifty Midcap 50 gaining 10.64% and the Nifty Midcap 100 up 10.39%.

On a one-year basis, returns turned negative across most indices. The Nifty Next 50 fell 12.06% YoY, while Nifty Small 100 declined 8.38%, indicating a challenging year marked by intermittent upswings but lacking sustained momentum.

Sector Performance: Autos and PSU Banks Outperform, IT and Realty Drag

Sectoral performance in September showed clear divergences. Technology and Realty were the biggest laggards, while Auto and PSU Banks stood out with strong gains.

• Nifty IT fell 13.72% over the quarter, affected by global tech weakness and profit booking.
• Nifty Realty lost 11.8%, impacted by rising input costs and cautious demand.
• Nifty Media also underperformed, declining 4.99% in the last three months and 26.15% over the past year.

On the positive side:

• Nifty Auto surged 11.7% in 3 months and 25.6% in 6 months, driven by festive demand and volume growth.
• Nifty PSU Bank gained 3.63% in 3 months and 19.3% over 6 months on improving credit growth and operational performance.
• Defensive sectors such as Pharma and FMCG underperformed due to pressure on consumption and rising input costs.

The divergence signals a sectoral rotation, with capital moving towards select themes like autos, industrials, and PSU banks, while tech and consumer-linked sectors faced resistance.

Macro Overview: Inflation Softens, RBI Maintains Status Quo

Macroeconomic indicators provided some relief in September:

• CPI inflation eased to 2.07%
• WPI inflation remained benign at 0.52%
• RBI held the repo rate unchanged at 5.50%

The decline in inflation was driven by softer food and energy prices and stable supply-side dynamics. The RBI’s decision to maintain the repo rate reflects a focus on balancing growth and financial stability.

However, capital flows painted a more cautious picture:

• FIIs pulled out ₹35,301 crore, citing elevated US bond yields, global economic uncertainty, and margin pressure in Indian equities.
• DIIs remained supportive, injecting ₹65,343 crore into the market, led by mutual funds, insurance companies, and SIPs from retail investors.

This contrast highlights the growing role of domestic institutions in supporting market sentiment during foreign outflows.

To understand how changing interest rates influence market performance, read our analysis on the Impact of RBI Monetary Policy on Indian Stock Markets.

Global Developments: Fed Rate Cut, Crude Softens, INR Weakens

The US Federal Reserve reduced interest rates by 25 basis points, bringing the Fed Funds rate down to 4.25%. While this generally supports capital flows to emerging markets, it also reflects concerns around global growth.

Meanwhile, crude oil prices softened to $65/barrel, aided by easing supply concerns. This provides a positive backdrop for India’s inflation and import bill.

The USD/INR exchange rate stood at ₹88.17, indicating a weaker rupee. This can add pressure on the current account but may support exporters, especially in sectors like IT and pharma.

Corporate Announcements and M&A Activity

September saw several strategic developments:

• Torrent Pharma acquired JB Chemicals’ stake.
• Poly Medicure, Chalet Hotels, and Akzo Nobel India executed significant deals.
• Swiggy and Rapido restructured business models and raised/diluted stakes.
• Infosys, Minda Corp, and HCL Tech announced major collaborations in EV and AI domains.

These updates reflect ongoing transformation across auto, tech, and consumer sectors.

IPO Market Activity: Strong Subscription, Heavy Pipeline

September witnessed enthusiastic IPO participation:

• Saathvik Green Energy saw 900x subscription and listed at ₹465 vs issue price ₹441.
• Jain Resource Recycling was subscribed 1250x and listed at ₹285.47.
• Solarworld Energy was subscribed 490x and listed at ₹37.69.

Looking ahead, October’s IPO pipeline includes:

• WeWork India, Tata Capital, JG Electronics, Advance Agrofil, and others
• More than ₹2.7 trillion worth of IPO fundraising expected
• Strong retail participation despite secondary market volatility

The robust IPO appetite is driven by investor interest in new-age businesses and favorable liquidity conditions.

Top Movers of the Month

Nifty 50 – Top Gainers:

• Adani Enterprises (+13.5%)
• Eicher Motors (+11.8%)
• Bajaj Finance (+11.1%)
• JSW Steel (+10.7%)
• Axis Bank (+9.2%)

Nifty 50 – Top Losers:

• Trent Ltd (-11.3%)
• Asian Paints (-9.1%)
• TCS (-6.3%)
• Tech Mahindra (-5.9%)
• Titan Company (-5.8%)

BSE 500 – Top Gainers:

• Tata Investment (+55.4%)
• Hindustan Copper (+44.0%)
• GMDC (+43.7%)

Market Valuation and Outlook

The Nifty remained in a range-bound to mildly positive zone in September. High valuations, global rate uncertainty, and foreign outflows limited major directional moves.

However, strong earnings, robust domestic liquidity, and IPO activity continued to offer a cushion on the downside.

Outlook for October 2025

• Seasonal trend: Historically positive; Nifty has closed higher in 7 of the last 10 years Octobers.
• RBI stance: Supportive, with no hike in repo rate.
• IPO flow: New listings (e.g., Tata Capital, LG India) may drive short-term momentum.

Key technical levels: Nifty is expected to remain within 24,500–24,850 unless a breakout occurs. Market movement may stay sideways to mildly positive.

Challenges ahead include sustained FII selling, global interest rate risks, and valuation pressures. Stable policy and strong domestic flows remain critical for any sustained uptrend. Seasonal trends and new listings may drive momentum. Those planning to participate should first familiarize themselves with understanding IPOs in India to navigate the primary market effectively.

Thematic Trends to Watch

1. GST Rate Cuts: Targeted reductions on consumer goods could support festive demand and discretionary consumption.
2. Global Trade Tensions: Fresh US tariffs on Chinese/Asian goods may indirectly impact Indian exporters.
3. Precious Metal Imports: Nearly doubled in September; driven by festive and hedging demand.
4. Primary Market Momentum: Despite volatility, IPO activity remains strong with high retail participation.
5. FII Outflows: Remain a concern, particularly in midcaps, IT, and export-linked sectors.

For a broader perspective on sectoral opportunities and current valuation trends, explore our Monthly Market Outlook Reports for continued insights.

Disclaimer: This article is for educational purposes only and does not constitute investment advice. Stock prices can be volatile; investors may lose capital.

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