Nifty Records Worst September in 25 Years Amid Persistent FII Outflows and Global Headwinds
Indian benchmarks faced continued pressure from foreign selling and rising global yields, setting a cautious tone ahead of the RBI's upcoming policy meeting.
The story
Indian equity benchmarks concluded September with significant losses, marking the Nifty 50's worst September performance in 25 years with a 6.7% decline for the series [11, 14]. The market remained under pressure in the final days of the month. On September 29, the Nifty 50 fell 64.05 points (0.28%) to close at 22,716.20, while the Sensex ended down 242.65 points (0.33%) at 72,529.07 [3, 5]. Foreign Institutional Investors (FIIs) intensified their selling, offloading Indian equities worth ₹9,980.22 crore on September 29, marking the largest single-day foreign outflow in nearly six months [5, 39]. Domestic Institutional Investors (DIIs) provided some counterbalance, buying ₹6,952.71 crore in the cash segment on the same day [5, 39].
On September 30, both the Sensex and Nifty opened lower amidst mixed global cues, with the Sensex eventually closing marginally down by 48.78 points at 72,480.29 [9, 17]. Volatile crude oil prices, high US Treasury yields, and ongoing geopolitical uncertainty, particularly concerning the US-Iran conflict, continued to weigh on investor sentiment [2, 3, 5]. Sectorally, Nifty Pharma saw gains of 0.64% on September 29, while Nifty IT recorded losses of 1.48% [3]. The sustained foreign selling, coupled with global macroeconomic pressures, contributed to the market's subdued performance as the month ended [14].
The tape
| Instrument | Last | Change |
|---|---|---|
| Sensex | 72,480.29 | -48.78 |
| USD/INR | 95.90 | -0.09 |
| Bank Nifty | 54,259.95 | -0.39% |
| India 10Y Yield | 7.1848% | |
| India VIX | 13.41 | -1.65% |
Flows & data
| Item | Reading | Read |
|---|---|---|
| FII Net Flows | -₹9,980.22 Cr (Sep 29, 2026) | Foreign institutional investors were significant net sellers in the cash market. |
| DII Net Flows | +₹6,952.71 Cr (Sep 29, 2026) | Domestic institutional investors provided buying support amidst foreign outflows. |
| CPI Inflation | 4.82% (Aug 2026) | Retail inflation continued its upward trend, rising from 4.45% in July. |
IPOs & the primary market
The primary market remained active with several IPOs opening for subscription as September concluded. SRIT India, a mainboard IPO of ₹218.40 crore, closed its subscription on September 30, having opened on September 28 with a grey market premium (GMP) around 23.85% [6, 8].
Shah Investor's Home (₹90.17 crore) and Shivchem Agro (₹14.01 crore) also closed their subscriptions on September 30, with GMPs of 7.49% and 9.68% respectively [6]. New issues opening on September 30 included Paramount Syntex (₹81.79 crore), Eventions (₹38.12 crore), TNA Solutions (₹37.86 crore), and Nityas Gems & Jewellery (₹108.35 crore) [6].
EverestIMS Technologies (₹48.46 crore) and Vans Electroengineerings (₹33.98 crore) opened on September 29 [6, 8]. Sai Urja Indo Ventures, which closed on September 29, is expected to finalize its allotment on September 30 [21]. India's mainboard IPO pipeline has swelled to approximately ₹3.86 lakh crore as of September 2026, with 130 companies having SEBI approval and another 75 awaiting it [29].
Valuation watch — India & global
Despite recent market corrections, Indian equities continue to trade at elevated valuations. The Nifty 50 is currently estimated to be 24% overvalued, with some individual stocks showing even higher premiums [34].
The Nifty 500 index, representing a significant portion of India's market capitalization, still has 151 stocks trading above 50x trailing twelve-month price-to-earnings multiples [38]. This valuation stretch persists even as the Nifty logged its worst September performance in 25 years, falling 6.7% for the month [11, 14].
Derivative data reveals a notable divergence in institutional positioning, with Foreign Institutional Investors (FIIs) cutting their index long exposure to 8.6% and holding a net short of -2.67 lakh contracts, while retail clients remain significantly net long at 82.5% [11]. This indicates a crowded short position among foreign funds against a bullish retail sentiment, signaling potential for sharp moves.
What we'll be watching
- The Reserve Bank of India's Monetary Policy Committee (MPC) will meet from October 5-7, 2026, with a potential interest rate hike on the agenda.
- Sai Urja Indo Ventures is anticipated to finalize its IPO allotment on October 5, 2026.
- SRIT India, Shah Investor's Home, and Shivchem Agro IPOs are expected to list on October 6, 2026.
- Vans Electroengineerings IPO is scheduled for listing on October 7, 2026.
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