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Indian Stock Market in October 2026: RBI Rate Hike, FPI Exodus and a Weak Rupee Test Sensex and Nifty

The RBI's first rate hike since 2023, heavy foreign selling and a falling rupee meet a strong TCS-led start to earnings season.

Raj ·Founder & Editor
Published in Finance · 5 min read ·
Illustration of an Indian city skyline under a volatile candlestick chart, with a scale balancing coins against an oil barrel
Illustration of an Indian city skyline under a volatile candlestick chart, with a scale balancing coins against an oil barrel
In this article

    India's equity market is going through a hard stretch. Interest rates have started rising again, foreign money keeps leaving, and the rupee is under heavy pressure. Even so, a strong start to earnings season and steady domestic buying have stopped the selling from turning into a rout. Here is where things stand in mid-October 2026.

    Where Sensex and Nifty Stand

    On Tuesday, 13 October, the BSE Sensex rose 1,109.10 points, or 1.54%, to close at 73,033.78. The Nifty 50 gained 358.60 points, or 1.60%, to finish at 22,721.95. The Nifty slipped to an intraday low near 22,288 before turning around, and it closed at the day's high. Bank Nifty ended 1.03% higher at 55,481.05. Smallcaps lagged, rising only about 0.11%.

    The bounce did not carry over. On Wednesday morning, 14 October, both indices opened flat and then slipped. Around 9:27 am the Sensex was at 73,002.54 and the Nifty at 22,698.80, as higher crude oil prices and continued foreign selling weighed on sentiment.

    The bigger picture is weak. By 8 October the Nifty 50 was down about 15% for 2026, so Tuesday's rally was a relief move inside a falling market, not a change in direction.

    RBI Turns Hawkish

    The biggest policy event of the past two weeks was the Reserve Bank of India's October review. On 7 October the Monetary Policy Committee voted unanimously to raise the repo rate by 25 basis points, from 5.25% to 5.50%. It was the RBI's first rate hike since February 2023. The standing deposit facility rate is now 5.25%, and the marginal standing facility rate and Bank Rate are 5.75%.

    The committee also changed its stance from "neutral" to "calibrated tightening." Governor Sanjay Malhotra said this means rate cuts are off the table in the near term, and the next move can only be a hike or a pause. The RBI raised its FY27 CPI inflation projection to 5.2% and kept its real GDP growth forecast at 7.1%. The central bank pointed to inflation pressure tied to the continuing West Asia conflict and higher energy prices.

    For equities, higher rates mean higher borrowing costs and a higher bar for valuations, especially in rate-sensitive sectors such as banks, NBFCs, real estate and autos.

    Foreign Selling, Domestic Buying

    Foreign portfolio investors (FPIs) are still the main source of pressure. NSDL data cited by India Today show FPIs pulled ₹44,166 crore out of Indian equities in October up to the latest available data. That follows ₹35,861 crore of outflows in September and brings net FPI selling for 2026 to about ₹3.04 lakh crore. Provisional exchange data showed foreign investors were net sellers again on 13 October, at ₹1,305.13 crore.

    Domestic institutional investors (DIIs) keep absorbing that supply. They bought ₹2,439.24 crore of equities on 13 October, and they have been steady buyers throughout the sell-off, supported by regular mutual fund SIP inflows. Mint reports that FPIs sold a net $27.8 billion of Indian equities in 2026 through September. It links the exodus to weak corporate earnings, high valuations, US tariffs and the falling rupee.

    Rupee Under Pressure, RBI Steps In

    The currency is closely tied to the equity story. When foreign investors sell shares, they convert their rupees into dollars, and that adds to the dollar demand already created by India's large oil import bill. Mint notes that domestic buying can support share prices, but it does not provide the dollars that exiting investors need.

    The rupee has fallen about 6.5% so far in 2026, according to Reuters figures cited by India Today. India's foreign exchange reserves dropped by $51.11 billion, from a record $785.71 billion on 4 September to $734.60 billion in the week ended 2 October, as the RBI defended the currency.

    On 10 October the RBI announced new measures. Starting 12 October, it began meeting the daily dollar needs of Indian Oil, Bharat Petroleum and Hindustan Petroleum through a special arrangement, which takes a large, recurring source of demand out of the spot market. It also tightened rules on some foreign-exchange derivative transactions. The rupee rose about 1% on 12 October to around 95.75–95.77 per dollar, its biggest single-day gain in six months. Analysts warn that the relief may not last unless oil prices and capital outflows ease.

    Earnings Season Starts on a Positive Note

    The September-quarter (Q2 FY27) earnings season began with Tata Consultancy Services on 8 October. TCS reported consolidated net profit of ₹13,884 crore, up 4% from the previous quarter and about 15% from a year earlier. That beat the CNBC-TV18 poll estimate of ₹13,673 crore. Revenue rose 11.2% year-on-year to ₹73,188 crore, constant-currency revenue grew 0.5% quarter-on-quarter, and the operating margin was 24%.

    Annualised AI revenue reached $3.1 billion, more than 10% of TCS's total revenue. Total contract value came in at $9.6 billion. TCS shares rose about 5.5–5.8% the next day. That was welcome for a stock that had fallen about 35.7% in 2026 before the results.

    Sector Trends

    IT is currently leading the market. Tuesday's rebound was driven by technology stocks, and IT names such as TCS and HCL Tech kept rising in early trade on Wednesday. A weaker rupee also helps exporters, because their dollar earnings convert into more rupees.

    Banks have recovered too, though less than IT, with Bank Nifty up about 1% on Tuesday. Broader markets are uneven. Midcaps and smallcaps have not matched the large-cap rebound, which suggests investors still prefer quality and liquidity.

    Key Drivers and Outlook

    Several factors will shape the market over the coming weeks:

    • Crude oil and West Asia: Higher oil prices raise inflation, widen the import bill and weaken the rupee. That pressure feeds into both RBI policy and foreign flows.
    • Interest rates at home and abroad: With the RBI tightening and US bond yields high, the gap that once drew foreign money to India has narrowed.
    • FPI flows: A slowdown in foreign selling would probably be the clearest sign that the market has found a floor.
    • Earnings: TCS gave a decent start, but results from banks, consumer companies and other IT firms over the coming weeks will show whether corporate profits can support current valuations.
    • The rupee: Whether the RBI's new measures keep working will matter for both inflation and foreign investor returns.

    In short, the market is caught between tighter monetary conditions and global stress on one side, and steady domestic buying and resilient corporate results on the other. Expect volatility to stay high until oil prices and foreign flows settle.

    Disclaimer: This article is for information only and is not investment advice.

    Sources

    Indian stock marketSensexNifty 50RBI monetary policyRupee
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    Written by Raj

    Founder & Editor

    I write HorizonDesk: practical, no-hype articles on technology, money, business and the vehicles we drive. Everything here is something I’ve researched, tested or wanted explained clearly myself.

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