Equity benchmarks logged their biggest monthly gains in seven months in October as strong corporate earnings and reasonable valuations drew in foreign investors.
The Nifty 50 and the BSE Sensex gained 4.5% and 4.6% in October, settling 2.1% and 2.4% below their all-time highs reached in September 2024.
On the day, the Nifty 50 fell 0.6% to 25,722.1, and Sensex shed 0.55% to 83,938.71, weighed by private lenders on potential outflows due to new index eligibility rules.
The markets regulator said on Thursday that bank stock indexes linked to derivatives contracts will be restructured in a phased manner by March 2026.
This is estimated to lead to outflows of about $300 million from HDFC Bank and $190 million from ICICI Bank, the two heaviest-weighted stocks in the benchmarks. The two lost 1.1% and 1.3%, respectively, on the day.
"While some profit booking emerged near the 26,000 mark, October has been a strong rebound month for markets with earnings delivering no major disappointments," said G Chokkalingam, founder and head of research at Equinomics Research.
"We are still trading at a premium to other markets, but relative to the valuations in September 2024, it has cooled. This is bringing back some foreign buying, especially with earnings set to pick up and stable monsoons likely to keep inflation in check," he added.
Foreign investors bought domestic shares worth $1.94 billion in October as of Thursday, snapping three months of outflows.
All 16 major sectors posted gains for the month. The broader small-caps and mid-caps rose 4.7% and 5.8%, respectively.
Financials, banks, private lenders jumped between 4.3% and 6% in October, helped by strong results from HDFC Bank and Axis Bank.
IT jumped 6.1% on better-than-expected results from TCS, HCLTech and Wipro.
Oil-to-telecom conglomerate Reliance Industries jumped 9% in October as second-quarter profit grew 10%.
Jeweller Titan Company and consumer goods firm Nestle India gained 11.3% and 10.3%, respectively, after upbeat quarterly results.
