Market Summary - September 2025 and NIFTY/SENSEX Outlook for October
NIFTY Holds Steady as FIIs Sell and DIIs Step In
Volatility at Lows – Calm Before the Storm?
While the broader setup looks stable, the remarkably low India-Vix warrants a degree of caution. It slipped to 11.07 in September, its lowest in over a year, signaling a phase of complacency within the market. Historically, such low volatility environments have often preceded sharp directional moves, as investors crowd into consensus trades.
Meanwhile, the US Dollar Index (DXY) was largely unchanged (–0.06%), but the Rupee continued to depreciate, closing near 88.79, hinting at weakness amid persistent foreign outflows. Despite this, market commentaries remain upbeat, with major brokerages and global banks projecting NIFTY targets between 26,000 and 27,000 by year-end, underpinned by expectations of resilient earnings and domestic demand recovery. However, with foreign flows turning negative, a rising dollar, and volatility at historically low levels, investors may be better off tempering expectations.
Gold Glitters, IT Stutters - September Snapshot
With precious metals surging on the back of renewed industrial demand and growing uncertainty around ongoing tariff wars, the NIFTY Metal Index outperformed sharply, rallying over 9.5% in September. Gold and Silver led the charge with gains of 11% and 17%, respectively, while Copper and Natural Gas followed suit, climbing 6.5% and 5%. The broader commodity rebound also found support from easing global inflationary pressures, aided by a 1.93% drop in crude prices. However, not all sectors shared the same momentum. The IT Index extended its losing streak, slipping another 4.34% for the month, its third consecutive decline as concerns around the H1B visa fee hike and persistent global uncertainty weighed on sentiment. Meanwhile, the Pharma sector attempted a mild recovery but failed to close above its previous month’s levels, as remarks from President Trump regarding potential tariff hikes on Indian drug exports and pressure on U.S. firms to localize production kept the sector under stress. Overall, markets remained in a consolidation phase after a volatile stretch. With the festive season approaching and recent GST cuts by the government, the coming months could see renewed activity. Keeping a close watch on auto sales data and rural demand indicators will be key in gauging whether this consolidation phase transitions into a more sustained recovery.
October Lookout
With FIIs kicking off the month by offloading ₹3,189 crore worth of equities and building aggressive short positions in futures, the broader sentiment seems anything but bullish. Despite the optimistic chatter around NIFTY hitting 27,000 by year-end, it might be wise to take that narrative with a pinch of salt and stay cautious in the near term. Technically, while NIFTY managed to close September in the green, there’s still visible upward pressure building from the 25,000 zone. In my view, the 24,000 level (Yearly VWAP) remains the key support to watch and if that gives way, we could very well see a retest of 23,600 in the sessions ahead.
- 09/10 - FOMC Minutes : The Federal Reserve cut the federal funds rate by 25bps in September 2025, bringing it to the 4.00%–4.25% range, in line with expectations. It is the first reduction in borrowing costs since December. Newly appointed Governor Stephen Miran stood alone in voting against the 25bps move, favoring a half-point cut instead. The central bank also released new economic projections. The Fed expects to lower rates by another 50bps by the end of 2025, and a quarter point in 2026, slightly more than expected in June. GDP growth projections were revised higher for 2025 (1.6% vs 1.4% seen in the June projection), 2026 (1.8% vs 1.6%) and 2027 (1.9% vs 1.8%). PCE inflation is seen at 3% for this year, the same as in June but the projection was revised higher for 2026 (2.6% vs 2.4%). Core PCE projection was also left at 3.1% for 2025 but was revised up for 2026 to 2.6% from 2.4%. The unemployment rate continues to be expected at 4.5% for 2025 but was revised lower to 4.4% from 4.5% for next year.
- 09/10 - Jobless Claims (USA) : Initial jobless claims in the US sank by 14,000 from the previous week to 218,000 on the third week of September, well below the market consensus that they would rebound to 235,000, to mark the lowest figure in two months. In the meantime, outstanding unemployment claims inched down to 1,926,000 in the second week of the month, the lowest since late May. The results pushed back against recent concerns of an aggressive deterioration in the labor market due to pessimistic jobs reports, which drove the Fed to restart its cutting cycle despite high inflation. In the meantime, initial claims by employees of the Federal government rose by 63 to 635 on an unadjusted basis. Federal government employment recently retook the spotlight amid reports that agencies are increasing their workforce on pre-emptive layoffs initiated by DOGE earlier this year, while a looming government shutdown may threaten a series of jobs.
- 13/10 - Inflation Rate YoY September : India’s consumer price inflation accelerated to 2.07% in August 2025, up from an upwardly revised 1.61% in July, broadly matching market expectations. This marked the first monthly increase in inflation in ten months, though it remained close to the Reserve Bank of India’s lower tolerance threshold of 2% under its inflation-targeting framework. Food prices, which make up nearly half of the CPI basket, fell 0.69%, moderating from a 1.76% decline in July. Inflation rose for pan, tobacco, and intoxicants (2.49% vs. 2.45%) and miscellaneous items (5.05% vs. 5.01%), while costs increased at a slower pace for clothing and footwear (2.33% vs. 2.50%), housing (3.09% vs. 3.17%), and fuel and light (2.43% vs. 2.67%).
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