Aditya Birla Sun Life Insurance Company Limited

Outlook for the Month of October’25

Economy Review

The key events in the month were –

  1. Domestic Factors –

a) RBI – RBI in its October’25 meet kept key policy rates unchanged as all members of the MPC unanimously voted for keeping the rates same. GDP forecast was upgraded by 30bps to 6.8% for FY26 and CPI inflation expectation was reduced to 2.6% from 3.1% for FY26

b) Trade Deficit – India’s trade deficit narrowed to $26.5 bn in August’25 vs last month $27.4 bn as imports decreased by 10% YoY.

c) Manufacturing PMI – India’s Manufacturing PMI for September’25 came in at 57.7 from 59.3 last month.

d) Monsoon – India’s monsoon season ended with 8% above normal rainfall with Kharif acreage above 1.4% yoy.



  1. Global Factors –

a) Federal Reserve – The US FED has reduced the key policy rates by 25bps to 4.00-4.25%.

b) US Tariffs – The US tariff tantrum continues with hike in H1B visa fees and 100% tariff on pharmaceuticals for branded medicines.

c) Crude Oil – Brent crude oil prices remained range bound at $68/bbl during the month, due to over supply concerns.

Domestic Macro Economic Data

Inflation – India’s CPI Inflation rose to 2.1% in August’25 from 1.6% in July 2025. India’s WPI inflation inched upto 0.5% in August’25 from -0.6% in July’25.

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Outlook for Equities
Nifty rose moderately 0.8% in September’25. Mid-cap and small-cap indices were up 1.4% and 1.9%, respectively. The Indian equity market continued to underperform global equity markets, given the valuation concerns and continued FII selling. Rupee has depreciated ~6% against the dollar in 1 year which is one of the worst performing EM currencies.

The US FED has reduced the key policy rates by 25bps to 4.00-4.25%. The US tariff tantrum continues with hike in H1B visa fees and 100% tariff on pharmaceuticals for branded medicines. On the domestic front, RBI kept policy rates unchanged and upgraded GDP forecast by 30 bps to 6.8% for FY26. India’s monsoon season ended well with 8% above normal rainfall, which will boost rural consumption. Fitch Ratings has revised India's GDP growth outlook for FY26 upward to 6.9% from 6.5% earlier. FIIs sold $1.7bn worth of equities whereas DIIs bought $7.4bn of equities during the month of September’25.

We expect a strong consumption boost post the GST reforms, income tax & rate cuts for FMCG, Autos and Consumer Durables in the festive season ahead. We expect Nifty earnings to grow at 12-13% CAGR over FY25-27. Nifty is currently trading at ~19x FY27e P/E. Investors can continue to invest in equities from a medium to long-term perspective.

Outlook for Debt
In October MPC, RBI kept the repo rate unchanged at 5.50%. All members unanimously voted to keep the policy repo rate unchanged. Stance was maintained at “neutral”. RBI MPC projected that policy space has opened up in order to be growth supportive. Current data on GDP has been robust while future expectations have sobered on growth due to trade related headwinds, even as domestic developments on GST provide impetus to economic activity. Demand side looks resilient as rural demand remains strong and urban demand has picked up. On inflation MPC sounded benign as they revised their forecasts downward but cautioned as unfavourable base effects will come into play going forward. Inflation projections were lowered for FY26 as well as Q1FY27. GDP growth forecast for FY26 was revised higher by 30 bps to 6.80%. The governor mentioned that "growth continues to be below aspirations". While all MPC members voted for a hold, two members, Dr. Nagesh Kumar and Prof. Ram Singh, wanted a change in stance from neutral to accommodative. A slew of reforms to support credit growth and rationalisation of certain regulatory limits for the banking sector were announced.

Monsoon has progressed well, cumulative rainfall was 8% above long-term average. Few parts have received excess rainfall and there was flooding in certain regions. Total kharif acreage was 1.4% higher than the same period last year. The central government announced its H2FY26 borrowing program of Rs 6.77tn, bringing the full-year FY2026’s borrowing to Rs 14.72tn slightly lower than projected borrowing for FY26. Goods trade deficit narrowed to $26.5 bn in August as imports decreased by 10% YoY. Services trade surplus in August at $16.6 bn improved marginally. WPI inflation for August was at 0.5% YoY. August CPI inflation inched up to 2.1% due to a broad-based marginal uptick across categories barring food inflation which contracted led by sharp decline in prices of vegetables, pulses and spices. Core inflation remained steady at 4.1%.

Fed FOMC reduced the Federal Fund rate by 25 bps to 4.00-4.25% range and signaled two more rate cuts by the end of 2025 as concerns intensified over the U.S. labor market even as inflation remained well above the 2% target. Bank of England kept their benchmark policy rates unchanged at 4% with a 7-2 majority, as rising inflation concerns took priority. The ECB kept interest rates unchanged while maintaining a positive outlook on the growth-inflation mix, dampening expectations of further rate cuts in the near term. Bank of Japan kept their policy rates unchanged at 0.5% as their focus continued on disinflation. BoJ have also announced selling of ETF and J-REIT holdings at a scale generally equivalent to the sale of stocks bought from banks in the 2000s. Brent oil prices remained range bound at $68/bbl.

Markets in the near term await impact of GST cuts on festive season spending, future trajectory of CPI data, FPI inflows in debt and currency movements. There is likelihood of another rate cut by RBI in the forthcoming policies as they look for supporting growth. Additionally, further negotiations on trade deals, oil prices and global events will be watched. Further data from US will be observed for cues from labour market on rate direction. Benchmark 10 year Gsec closed at 6.57% on September 30, 2025, 2 bps lower during the month. 10 year Gsec yield in the near term is likely to be in a range of 6.45%-6.65%. Spread of 10 year Gsec with corporate bond is near 55 bps and is likely to be in a range of 50-60 bps.

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