Where is the market headed?
SBI Research is calling for the abolition of the Long-Term Capital Gains (LTCG) tax on equities and requesting the government to take action, a sentiment previously raised by several Foreign Institutional Investors (FIIs). With the Finance Minister recently mentioning LTCG and opening the floor for a healthy debate, there is speculation that the government might take action if market weakness persists. Alternatively, removing the Securities Transaction Tax (STT)—a severe tax that ideally should have been scrapped when LTCG was re-introduced—could also provide significant relief to the market.
Market Overview
The markets turned upward, driven by rumors of potential government tax interventions and a softening of US yields over the past two sessions. The Nifty index surged by 1.6%, marking one of its largest single-day gains in a long time. Such decisive moves frequently serve as a signal for short-term bottoms, if not a long-term bottom.
Crucially, the market closed at the high of the day without giving up gains, while also finishing above a two-day high, adding further strength to the bullish signal. Current market indications suggest the index could race toward the 23,000 level in the coming days. The bottom established near 23,000 in mid-September will need to be tested and broken for any meaningful upside to materialize, but October 13th marks a promising start as the short-term trend for Nifty has officially turned positive.
Major Market indices
While Nifty maintained strong momentum throughout the day, small-cap stocks initially struggled in the morning session, dropping 1%, before recovering to close up 0.34%. Broad gains were also observed across the Nifty Next 50, Midcap indices, and Bank Nifty, which rose by 1%.
Foreign investors currently hold heavy short positions in the Indian futures market, meaning any sign of a market turnaround causes them to cover shorts quickly, adding further credibility to the rally.
Heat Maps
The Nifty heatmap showed early morning strength concentrated in the IT sector, which accelerated further during the second half of the day. As the session progressed, smart gains spread across banking, finance, auto, and defense stocks, delivering a very strong session for large-cap names. Within the Nifty 500 space, HCL Tech, TCS, and Infosys recorded the highest turnover among all 500 stocks.
On the declining side, RBL Bank experienced significant losses, while ABB, Kotak Bank, Maruti, Polycab, and MCX also lost some ground. Conversely, solid gains were logged by Shriram Finance, ICICI Bank, Bajaj Finance, Coforge, Bandhan Bank, and IndusInd Bank, resulting in a overall positive performance as all sectors ended in green territory.
Advance/Decline Trend
The market breadth shifted dramatically after 2:00 PM, as the advance-decline ratio moved rapidly higher, ending with 367 advances against only 131 declines in a strongly positive session.
Sectoral Overview
The IT sector delivered a standout performance, clocking a 5% single-day gain—a strong indicator of a potential bottom, as 5% moves typically occur at market bottoms rather than midway through a trend. Over the past three months, the IT sector has turned positive with a 2.8% gain, and over the past month, it rose 3.14%, making it one of only two positive sectors alongside Media.
This movement indicates that the global AI trade and yields may be topping off, the USD/INR exchange rate may have hit its limit for now, and the Indian market appears ready for a bounce.
Sector of the Day
Nifty IT Index
The impressive rally in IT was signaled two days prior when IT stocks reached a two-day high and closed there, with gains led by HCL Tech, Tech Mahindra, LTI Mindtree, and Mphasis.
U.S. Market Update
In global markets during the previous session, the Nasdaq ended lower due to weakness in AI stocks, while the Dow Jones rose 0.38% and the Russell index declined. Top losers in the US included Lumentum, SanDisk, Astera Labs, Nebius Group, and Monolithic Power.
On the gaining side were Meta Platforms, Shopify, Keurig Dr Pepper, GE Healthcare, and Mondelez, reflecting a mixed bag where general non-tech companies advanced while AI and tech stocks lost ground. Most of the tech block on the market map appeared red, although Meta, Apple, Walmart, Microsoft, and SpaceX recorded gains.
Tweet Of The Day
Addressing foreign investor activity, recent reports highlighted that foreign institutional investors have sold $32 billion worth of Indian equities, representing the highest absolute net selling in Indian market history since 2000. However, evaluating this selling as a percentage of total Assets Under Custody (AUC) shows that FII sales account for less than 5% of their total holdings. In comparison, while the 2008 sell-off seemed smaller in absolute numbers, it was far larger relative to assets held, making the 2026 fall relatively modest in percentage terms.
