Even as benchmark indices rebounded sharply in October, the rally’s foundations are showing signs of strain. ASK Investment Managers, in its November 2025 market commentary, has cautioned that India’s equity gains are being powered by a shrinking set of winners.
According to ASK, only 26 stocks accounted for 60 percent of the BSE 500’s Rs 18-trillion increase in market capitalisation during October 2025. Earlier in the year, it took nearly twice that number — about 50 stocks — to contribute the same share of gains. “Despite index-level gains, market participation continues to weaken,” the firm said, noting that the NSE 500 advance–decline line remains deeply negative and near multi-year lows.
This thinning breadth suggests the market’s strength is increasingly concentrated in large caps and a few momentum-led names. While the BSE 500 rose 4.2 percent in October, bringing year-to-date returns to 5.8 percent, the underlying participation remains narrow — an early signal that liquidity may be outpacing conviction.
October marked a turnaround in foreign investor sentiment. FIIs pumped in $2.5 billion into Indian equities — their strongest monthly inflow of 2025 — after three months of selling. Domestic institutional investors also stayed net buyers, supported by easing inflation, lower bond yields, and early signs of a US–India trade thaw.
The US Federal Reserve’s second consecutive 25-bps rate cut, following an eight-month pause, revived global risk appetite. ASK notes that 15 major central banks have together cut policy rates by 850 basis points in 2025, marking the fastest global easing cycle since the pandemic.
This liquidity has buoyed risk assets, but participation has narrowed. ASK’s data show that large caps outperformed mid- and small-caps, with the BSE 100 gaining 4.6 percent, the BSE Midcap 150 up 4.3 percent, and the BSE Smallcap 250 lagging at 3.4 percent.
The rally was reinforced by a steady earnings season. For 361 companies reporting so far in Q2FY26, ASK notes that sales grew 5 percent year-on-year, EBITDA 14 percent, and PAT 13 percent, aided by better operating leverage.
Domestic-focused sectors outperformed exporters. Capital goods, real estate, and PSU banks delivered strong earnings and order inflows, while IT and export pharma lagged due to global softness. Automobiles, especially two-wheelers and entry-level passenger vehicles, benefited from festive-season demand, while FMCG remained subdued on rural weakness and GST-related adjustments.
ASK also flagged encouraging signals from cement and oil & gas, where large industrial groups have announced fresh capex — an early sign of renewed confidence in the investment cycle.
Portfolio tilt: large caps, domestic demand, financialisation
ASK remains constructive on India’s medium-term outlook but is staying selective. CIO and CEO George Heber Joseph said the firm’s positioning continues to favour domestically oriented, fundamentally strong businesses aligned with structural themes such as consumption, infrastructure, and financialisation of savings.
“At ASK, our house view remains tilted toward large caps, given their earnings durability, macro resilience, and valuation comfort,” Joseph said. “Historically, large caps have outperformed during uncertain periods due to stronger balance sheets and deeper institutional ownership.”
The firm’s preferred themes include Make-in-India, defence exports, affordable consumption, PSU and private banks, and digital infrastructure. ASK also expects credit growth to remain in double digits in FY26, supported by clean bank balance sheets and policy tailwinds.
Falling crude oil prices (near $65 a barrel), softer food inflation, and GST cuts in discretionary categories are supporting India’s disinflation and consumption narrative. Yet, ASK’s data show the equity rally has grown narrower — a warning that markets could be running ahead of fundamentals.
“The liquidity tide is lifting the index, but not all boats,” said a Mumbai-based portfolio manager tracking ASK’s note. “When fewer stocks make new highs even as the index rises, that’s usually a sign of exhaustion beneath the surface.”
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