In October 2026, India’s markets told two different stories. The Nifty rose 1.9%, but midcaps fell 3.4% and smallcaps nearly 4%. Brent crude crossed $104, foreign investors pulled out over ₹34,800 crore, and higher interest rates added pressure. Yet IT stocks surged 18%, Jio Platforms delivered India’s biggest IPO, and defence orders crossed ₹3 lakh crore.

Here’s what happened, and why it mattered.

Markets Last Month 💡

India in October: Large Caps Up, Everything Else Down

October saw mixed results in Indian markets. Large caps finished higher, with the Nifty rising 1.9% and the Sensex up 2.7%. Meanwhile, the broader market declined: midcaps dropped 3.4%, smallcaps fell about 4%.

IT stocks stood out, gaining about 18% despite the US suspending green-card processing for Indian IT firms. Strong results from HCLTech and Tech Mahindra drove this rally. In contrast, metals, consumer durables, and chemicals were among the weakest sectors.

Several factors put pressure on the market. After the RBI raised the repo rate, bond yields reached a three-year high. Brent crude rose above $104 amid tensions with Iran, and foreign investors withdrew more than ₹34,800 crore from Indian stocks throughout the month. The US selloff in AI stocks also affected Indian data-centre, cable, and electronics companies.

There were also some positives. The Finance Minister’s comments on capital gains tax relief, the IMF raising India’s growth forecast to 7%, and Fairfax’s ₹52,878 crore deal for IDBI Bank all boosted sentiment. Jio Platforms ended the month on a high note by listing at a 21.4% premium after India’s largest-ever IPO.

Jio Platforms: India’s Biggest IPO Draws Record Demand in a Shaky Market

Despite a tough year, big deals have continued. In July, SBI Funds Management’s IPO was subscribed over 41 times (Capital Market Frenzy: India’s Mega Fundraises in July 2026). In September, NSE listed quietly while the Nifty dropped more than 6% (IPOs and M&A Keep Deal-Making Alive in a Weak Market). In October, Reliance’s Jio Platforms faced the biggest test of investor appetite so far.

Jio’s IPO is the largest ever in India, with a goal of raising about $3.2 billion. Shares were offered between ₹1,065 and ₹1,119, and the final price was at the top of that range. This puts Jio’s value at about $108 billion, or around 32 times its earnings. Unlike NSE, where proceeds went to selling shareholders, Jio is raising money for its own use. Around ₹27,500 crore will go toward paying down debt.

Demand was strong right from the beginning. Before the issue opened on October 21, 212 anchor investors bought ₹8,110 crore worth of shares at ₹1,119 each. Anchor investors are big institutions that agree to buy shares before the IPO opens. LIC led this group, which also included BlackRock, Fidelity, and JPMorgan. The anchor portion was about 30 times oversubscribed. By the end, the IPO was subscribed 22 times overall and 70.6 times in the part set aside for large institutions. Total bids were over $77 billion.

The timing makes this demand even more notable. As of October 26, 2026, foreign investors have withdrawn over ₹45,000 crore from Indian stocks. The Nifty has been flat, while mid- and small-cap stocks have dropped by around 6% so far.

Like NSE, this shows that big, well-known companies can still raise money even when the overall market is weak. Jio will be listed on October 28, 2026.

Record Approvals, Cooling Stocks: Defence Faces a Valuation Test

India’s defence sector has developed step by step this year. In June, a surge of contracts boosted the sector (Guns, Orders, and Outperformance: Indian Defence’s Breakout Month). By August, attention turned to whether companies could deliver on those orders (From Orders to Execution: India’s Defence Manufacturers Widen the Field). In October, the government approved another big round of purchases, but share prices did not rise.

At the end of the month, the government approved ₹2.12 lakh crore in defence purchases, including kamikaze drones and helicopters. This added to the ₹1.1 lakh crore of capital purchases cleared by the Defence Acquisition Council in September. In total, that’s over ₹3 lakh crore in just two months.

Sigma Advanced Systems received a ₹973 crore order for base bleed units used in 155mm artillery shells. PTC Industries secured aerospace orders from BrahMos and DRDO, and raised ₹1,800 crore through a QIP.

Production capacity continued to grow along with new orders. Cochin Shipyard announced a ₹6,000 crore investment plan in Kerala and Tamil Nadu. Mazagon Dock was picked as the main shipyard for new shipbuilding clusters at Dighi and Dugarajapatnam. HAL acquired CAE’s 50% stake in HATSOFF, their helicopter-simulator training joint venture, at no cost. Mahindra & Mahindra and Embraer continued with plans to assemble C-390 military transport aircraft in Nagpur, depending on a government purchase. ideaForge took a ₹151 crore loan from the Technology Development Board to develop a heavy-lift autonomous drone for logistics.

Share prices showed a different trend. By October 26, the Nifty India Defence index had fallen about 7% over the past month. Its year-to-date gain dropped from about 20% in early October to around 12%.

Investors do not appear to doubt that the orders will arrive. Instead, they are considering how much of the future revenue is already reflected in share prices, and whether companies can deliver on schedule.

Record Highs to Hard Questions: How the AI trade wobbled during the month

Mid-October seemed like a turning point for the AI market. Three major news stories broke in one week. The Financial Times and CNBC reported that OpenAI told investors its annual revenue was about $20 billion below expectations, which caused Nvidia, Oracle, and CoreWeave shares to drop sharply. A few days later, Broadcom CEO Hock Tan said many AI investors were acting like casino gamblers and warned that a lack of capital could soon limit the industry. Anthropic also announced its revenue growth slowed to 45% quarter-on-quarter in the third quarter. By the end of the week, the Nasdaq had its worst performance in months.

The concerns were not about demand. Analysts at D.A. Davidson said Anthropic’s slowdown was due to more competition, not less demand. Amazon reported that its cloud capacity is mostly booked through 2027. Lumentum, which makes optical parts, said its components are sold out until early 2029.

The main concern was who was paying and how. More of the expansion is now being funded with borrowed money. Broadcom was said to be arranging over $50 billion in financing for custom chips it is developing with OpenAI, while SpaceX sought $40 billion to buy Nvidia chips. Banks and Blackstone created a record $60 billion debt package to fund Broadcom chips for Anthropic. Meta’s stock dropped more than 5% after it created a new class of non-voting shares to help pay for its AI spending. When suppliers help finance their own sales, investors start to wonder how much demand would exist without that support.

Indian investors are dealing with a similar issue. Infosys lowered its FY27 growth forecast to 1–2%, down from 1.5–3%, even though its AI revenue grew by 29% in the quarter and now accounts for 10.5% of total revenue. AI business is growing, but not quickly enough to offset other weaknesses.

The AI boom is still going, but, as with defence stocks, markets now want evidence that the spending will yield real returns, not just more spending.

Higher Rates, New Owners: A Busy Month for Indian Banking

On October 7, the RBI’s Monetary Policy Committee voted to raise the repo rate by 25 basis points to 5.50%. The committee also changed its stance to “calibrated tightening,” which means rate cuts are off the table for now. The RBI’s next step will be either another rate hike or keeping rates steady.

Inflation left the RBI with little choice. CPI inflation increased to 4.8% in August from 4.5% in July, and core inflation reached 4.2%. With a weak monsoon, El Niño, and high energy prices still affecting the economy, the RBI expects inflation to average 5.2% in FY27 and peak at 6.0% in the October-to-December quarter.

Banks entered this period of tighter policy in strong condition. Lending grew quickly in the July to September quarter, with loan books rising 20–30% at several banks, including Kotak. Most banks saw profits increase: Federal Bank’s rose 45%, Kotak’s 29%, and ICICI Bank’s 20%. However, higher funding costs reduced their margins.

October brought changes in ownership and management at several Indian banks. The biggest deal was at IDBI Bank, where Fairfax Financial bought a 60.72% stake for ₹52,878 crore (about $5.6 billion), marking the largest foreign investment in Indian financial services so far. The government and LIC will keep about 34% between them. IDBI shares rose 13%, although staff protested the deal with a hunger strike. Fairfax also has two years to address its 40% stake in CSB Bank. In a separate move, the RBI approved the merger of Emirates NBD’s Indian branches into RBL Bank starting December 1.

Two major private banks also announced new CEOs. HDFC Bank chose Anup Bagchi, an experienced executive from ICICI, as its MD & CEO starting October 27, ending months of uncertainty about its leadership. Kotak Mahindra Bank named Anup Kumar Saha as MD & CEO, effective January 1, 2027.

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📚 Bookmarked By Windmill

📹 Video: Global Investing for Indian Portfolios: A Practical Framework

India’s investment scene is in a strange spot. The economy is growing, and companies are doing well, but foreign investors are still staying away. Factors like a weaker rupee, less appealing valuations, tax uncertainties, and a global focus on AI investments have made India less attractive to international investors. In this interview, Sonia Shenoy talks with Srini Srinivasan, Managing Director of Kotak Alternate Asset Managers, about what’s holding India back and where the next big investment opportunities might be.

They discuss why India’s tax system needs to change, how gold imports put pressure on the rupee, and why having clear policies is just as important as tax rates for foreign investors. The conversation also examines India’s potential in manufacturing, defence, AI, tourism, and life sciences, as well as the challenges GIFT City faces in competing with other global financial centres. They talk about the importance of channelling domestic savings into long-term infrastructure and income-generating assets. Srinivasan also shares why he remains positive about gold and sees opportunities in private markets, even as foreign investors are hesitant.

The main point is that India still offers strong long-term investment opportunities, but continued growth will depend on simpler taxes, steady policies, and better use of domestic capital. For long-term investors, times of low confidence can be a good chance to buy quality assets, as long as they are willing to look past short-term uncertainty.

Listen on YouTube→

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