Outlook for the Month of November’25

Economy Review

The key events in the month were –

Domestic Factors –

a) Trade Deficit – India’s trade deficit rose to a 11 month high in September’25 to $32.2bn as imports surged faster than exports after USA doubled tariffs to 50% on several Indian goods in late August.

b) Manufacturing PMI – India’s Manufacturing PMI rose to 59.2 in october’25 Vs 57.5 in September’25.

c) GST Collection – GST collection for the month of October’25 saw a 4.6% YoY to Rs 1.99tn given the GST rate cut implementation.

d) IMF – IMF upgraded India’s GDP forecast for FY26 to 6.6% from 6.4%.

E) INR – The INR depreciated ~5.6% in the last 1 year and went below Rs 88/$ on FPI outflow in the equity markets and tariff concerns.

Global Factors –

a) Federal Reserve – The US FED has reduced the key policy rates by 25bps to 3.75-4.00%.

b) US Tariffs – India and US are discussing a trade deal, this will help remove the uncertainty of tariffs.

c) Crude Oil – Brent crude oil prices moderated to $65/bbl during the month, due to global demand concerns.

Domestic Macro Economic Data

Inflation – India’s CPI Inflation moderated to 1.5% in September’25 from 2.1% in August’25, due to decline in food inflation. India’s WPI inflation came in at 0.1% in September Vs 0.5% in August’25.

Outlook for Equities
Nifty rose 4.5% in October’25 on easing global trade tensions, improving growth-inflation dynamics and robust festive season. Mid-cap and small-cap indices were up 5.8% and 4.7%, respectively. The Indian equity market outperformed due to positive FII flows and decent Q2FY26 earnings season so far.

The US FED has reduced the key policy rates by 25bps to 3.75-4.00%. Trade deal is expected between US and India. On the domestic front, trade deficit inched up to $32bn as imports surged more than exports. The Q2FY26 earnings season showed subdued trends in mass-consumption items but an uptick in select discretionary segments, modest IT services demand and moderate loan growth for banks. India’s primary market witnessed its highest-ever IPO activity in a single month in October’25, there were 10 IPOs raising $5bn. Meanwhile, FIIs turned buyers in the month of October’25 and bought $2.1bn worth of equities whereas DIIs bought $5.8bn of equities.

Nifty is currently trading at ~20x FY27e P/E at its 10 year average. We expect Nifty earnings to grow at 12-13% CAGR over FY25-27. Investors can continue to invest in equities from a medium to long-term perspective.

Outlook for Debt
The minutes of RBI’s October’25 policy signalled a dovish tone. The MPC members acknowledged some room for a rate cut, though most members preferred to wait and watch for the impact of the past measures, evolving growth-inflation dynamics and the need to preserve policy space. Dr Kumar and Prof Singh professed for a change in the stance from ‘neutral’ to ‘accommodative’. Each of the MPC members highlighted the benign CPI inflation trajectory on the back of easing food prices, efficient supply-chain management and GST reforms aimed to induce a disinflationary impact on most goods of mass consumption.

Liquidity conditions tightened during the month led by GST related outflows. System liquidity turned to deficit but ended the month marginally in surplus. Meaningful FX intervention by the RBI in the spot market, along with muted government spending and increase in currency in circulation also led to liquidity tightness. The center has been prudent in fiscal management, with the fiscal deficit in H1FY26 at 37% of FY2026BE. However weak tax collection growth remains a concern, moderation in revenue expenditure and front-loaded capital expenditure were points of note. GST collections for activity in September’25 were weak at 4.6%, with the trend likely to persist due to the impact of GST rate cuts offset by some pickup in demand.

September’25 CPI inflation eased to 1.5% due to a decline in food inflation and partial impact of the GST rate cuts across some items in the CPI basket. Prices of vegetables, fruits and pulses declined. Core inflation moved up to 4.5% from 4.1% previous month. WPI inflation for September’25 was at 0.1% YoY. IIP growth in September’25 decreased to 4% mining growth in contraction. Goods trade deficit widened sharply to $32 bn in September’25. The rise in imports was led by gold and electronics. Services trade surplus in September’25 at $15.5 bn remained steady. INR REER fell to 97.7 in September’25 from 98.8 in August’25. In the same period, INR moved to average around 88.3 against USD in September’25 from 87.6 in August’25, due to FPI outflows in equity markets and tariff concerns.

Fed FOMC reduced the Federal Fund rate by 25 bps to 3.75-4.00% range in a 10-2 majority, amid a divide as Governor Miran voted for a 50 bps cut while Kansas City Fed President Schmid voted against a cut. Fed Chairman Powell cited unemployment concerns as the reason for the cut but has hinted at a pause in the rate cut cycle going ahead given the lack of government data due to the shutdown. ECB kept interest rates unchanged for the third consecutive time citing resilience of the Eurozone economy. Bank of Japan kept their policy rates unchanged at 0.5% in a 7-2 majority, maintaining its wait-and-watch approach.

Markets in the near term await future trajectory of CPI data, growth impact of GST cuts in 2HFY26, FPI inflows in debt, currency movements and outlook on RBI’s rate action in December MPC. Additionally, further negotiations on trade deals, oil prices and global events will also be watched. Benchmark 10 year gsec closed at 6.53% on October 31, 2025, 4 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.