Central bank signals steady stance amid inflation cool-off

The Monetary Policy Committee indicated that a steady policy rate remains appropriate as headline inflation cools and core pressure stays contained. Officials reiterated a “data-dependent” approach and emphasized liquidity fine-tuning rather than broad policy shifts in the near term.

Why it matters

A prolonged pause gives time for past hikes to transmit, while anchoring inflation expectations. Bond markets typically welcome visibility on rates; corporates benefit from planning certainty and stable borrowing costs.

Market reaction

• Benchmark yields were range-bound with a slight bull-steepening at the long end.
• Rate-sensitives—banks, autos, real estate—saw selective buying.
• Rupee traded in a narrow band alongside broader EM currencies.

What to watch next

1. Next CPI print for confirmation of disinflation trend.
2. Liquidity operations—VRR/VRR-reverse—around tax outflows and government borrowing.
3. Core inflation components: housing, healthcare and education.

For borrowers, the message is simple: expect stability in EMIs in the near term. Lenders, meanwhile, continue to compete on spreads and fees rather than rate direction.

Equities extend gains; banks, IT lead weekly rally

Domestic equities extended their advances for a third consecutive session. Financials outperformed as credit growth held steady and asset quality trends stayed benign. Large-cap IT also participated on hopes of improved deal closures in H2.

Under the hood

• Advance–decline ratio stayed positive across mid and small caps.
• Foreign portfolio flows remained net positive for the week.
• Volatility index cooled toward long-term averages, aiding risk appetite.

Strategy takeaways

Analysts recommend staggered deployment, favoring quality compounders and leaders with pricing power. Export-oriented names could benefit if global demand stabilizes, while domestic cyclicals ride capex recovery.

Near-term catalysts include September quarter pre-announcements, monthly auto volume prints and PMI data.

Monsoon recovery boosts outlook for rural demand

After a patchy start, rainfall improved through September, lifting reservoir storage and sowing activity. Economists see a clearer line of sight to a pickup in rural consumption, historically a swing factor for FMCG, two-wheelers, fertilizers and agri-inputs ahead of the festive season.

Pocket-wise impact

• FMCG: better volume traction in value packs; distribution in Tier-2/3 towns improves.
• Auto: two-wheeler retails strengthen; tractor outlook stabilizes with better soil moisture.
• Agri-inputs: balanced inventory; watch realizations as sowing mix evolves.

Experts caution that rain distribution remains uneven across regions. Monitoring mandi prices and rural wage prints over the next two months will be key to validating the demand upshift.

Large-cap earnings preview: margins seen improving

Street models sequential margin improvement on softer input costs and operating leverage. Revenue growth remains moderate, but cost discipline and mix shifts are expected to support profitability across key sectors.

Sector dashboard

• Financials: credit growth healthy; NIMs stable; watch fee income and opex control.
• Autos: premium mix aids margins; inventory normalization in PVs a focus.
• IT Services: commentary on large deal ramp-ups, pricing and utilization in spotlight.
• Industrials: execution pace and order inflows to drive visibility.

Key risks include FX swings, delayed price pass-through and global demand variability. Guidance will likely dictate post-result stock moves more than headline beats or misses.

Digital payments scale new high ahead of festive season

Transaction volumes across UPI and card networks surged to new records as consumers brought forward festive purchases. Payment failure rates stayed low due to capacity upgrades and better issuer-acquirer coordination.

Key drivers

• Higher merchant acceptance in Tier-2/3 towns via QR and tap-to-pay.
• Seamless EMI journeys within payment apps for high-ticket items.
• Targeted cashbacks and BNPL offers driving first-time users.

FinTechs expect sustained momentum through October, aided by salary cycles and festive campaigns. Regulators continue to emphasize security and dispute-resolution speed to preserve trust at scale.