Domestic equity gained momentum on the back of robust GDP data for Q1FY26: ICRA Analytics

Mumbai, 22nd October, 2025: Domestic equity markets rose following robust macroeconomic indicators, as India’s economy expanded by 7.8% YoY in Q1 FY26, marking the strongest growth in five quarters, while the Services PMI surged to 62.9 in Aug 2025. its highest level in over 15 years, driven by a sharp rise in new orders and resilient demand. Sentiment was further boosted as the GST Council simplified the existing four tax slabs (5%, 12%, 18%, 28%) into a two-rate structure of 5% & 18% and proposed a special 40% slab for select luxury items such as high-end cars, tobacco, and cigarettes. Gains extended after the U.S. Federal Reserve delivered its first rate cut of the year in Sep 2025, citing recent weakness in the labor market. However, overall gains were capped amid lingering uncertainty over India–U.S. trade negotiations and continued foreign institutional investor outflows from domestic equities.

Bond yields fell after the government projected a smaller net revenue loss from recent Goods and Services Tax revisions than initially expected, easing fiscal concerns. Reassurances from officials about meeting the fiscal deficit target further supported the positive sentiment. However, gains were restricted despite a 25 bps rate cut by the U.S. Federal Reserve in its Sep 2025 policy meeting, as hawkish commentary from the Fed Chair overshadowed the rate cut. The rate cut was described as a “risk-management” move, and the Chair emphasized a data-dependent approach, stating that future decisions would be made on a “meeting-by-meeting” basis.

Following are the trends spotted in the Equity Mutual Fund category as on Sep 2025:

  • All categories across Equity Mutual Funds gave positive category average returns over 3-year, 5-year and 10-year period. However, on 1-year period, all the categories continued to post negative average return.
  • Small Cap Fund gave maximum category average return over 5-year and 10-year period. Over 5-year period, small cap funds gave category average returns of 27.59%.
  • Large Cap Fund gave negative category average returns of around 4.92% over 1-year period.

Following are the trends spotted in the Debt Mutual Fund category in this month:

  • Credit risk funds gave maximum average returns over 6-month, 1-year, 3-year and 5-year period. Over 6-month period, credit risk funds gave average returns (annualised) of 10.02%.
  • Low Duration Fund gave maximum average return over 1-month period (18.57%). Gilt Fund with 10-year constant duration gave maximum average return over 10-year period (7.76%).
  • All categories across debt mutual funds gave positive returns across s1-year, 3-year, 5-year and 10-year period.