Crisil’s Financial Conditions Index (FCI) has showed an improvement in India’s domestic financial conditions in the month of October amid heightened optimism over country’s economic output. Crisil’s FCI rose to -0.3 in October, 2025 from -0.6 in September, 2025. This marks easier conditions but still below the long-term average. The FCI combines key market indicators such as interest rates, bonds, equities, and exchange rates into a single measure to show how tight or easy financing conditions are in an economy. Crisil highlighted that the rise in FCI was primarily driven by a return of foreign portfolio investors (FPIs) to Indian markets after four months, energising both debt and equity segments amid easing US yields and heightened optimism over India’s economic outlook as well as anticipated trade advances with the United States.

It has pointed out that the October witnessed robust FPI inflows, with investments totalling $4 billion, the first after four months and highest in the year so far. The debt segment inflows led with $2.1 billion, while equities rebounded with $1.7 billion, reversing previous outflows. It noted that the domestic markets have posted their strongest monthly gains since May, aided further by the Reserve Bank of India’s (RBI) proposed reforms to improve credit flow by revising lending norms, alongside a broadly stable Rupee and improving credit growth. Despite these supportive factors, moderating liquidity emerged as a drag, attributed to increased currency circulation during the festive season and likely RBI dollar sales aimed at protecting the rupee.

However, it said that the liquidity surplus was cushioned by a 25-basis point cut in the Cash Reserve Ratio (CRR), which helped buffer the banking system. Further, Indian equity indices, the Sensex and Nifty 50, rose 2.2 per cent each on average in October, with the RBI raising its GDP growth forecast to 6.8 per cent from 6.5 per cent. Moreover, the rupee remained steady at 88.4 to the dollar, supported by FPI flows and RBI intervention, while bond yields held firm at 6.52 per cent. Besides, it noted that Brent crude prices eased 4.9 per cent on-month and were 14.6 per cent lower on-year, driven by supply adequacy and slowing global growth concerns. Going forward, Crisil expects the FCI to remain within the comfort zone for the rest of fiscal 2026, buoyed by the CRR cuts and potential for further rate reductions.