The festival cheer of Diwali found its way to Dalal Street, with Indian equities recording their strongest weekly gains in nearly six years. Foreign investors stepped up purchases of domestic stocks, seeking investment opportunities amid a sharp selloff in global artificial intelligence (AI) stocks. A retreat in crude oil prices further boosted sentiment.
FPIs bought a record ₹45,960 crore of Indian equities during the week, even as domestic institutional investors (DIIs) sold ₹24,197 crore, their largest-ever weekly net outflow.
The rally was accompanied by a sharp improvement across other financial markets. The rupee strengthened for a sixth consecutive session to a six-month high of 93.91 against the dollar, while the yield on the benchmark 10-year government bond fell 23 basis points over the week, its steepest weekly decline since 2019. On Friday, however, it rose about 2 basis points to 7.19 per cent.
Brent crude recorded its biggest weekly percentage fall since the Covid-triggered crash of 2020, retreating nearly 18 per cent from its October 30 high of nearly $118 a barrel.
For the week, the Nifty 50 rose 8.58 per cent and the Sensex 8.82 per cent, their strongest weekly gains since February 2021. The Nifty Financial Services advanced 10.41 per cent.
The rally, however, was concentrated in the benchmark stocks, with smaller companies failing to keep pace. Only four of the 50 Nifty constituents ended lower on Friday. Mahindra & Mahindra led the gainers, rising 5.11 per cent, followed by ICICI Bank, which advanced 4.75 per cent to ₹1,571.20. Tata Motors Passenger Vehicles fell 0.58 per cent, while Eicher Motors declined 0.56 per cent. The Nifty Midcap 150 slipped 0.09 per cent and the Nifty Smallcap 250 fell 0.85 per cent.
“The correction in crude oil prices and recovery in the Indian rupee supported market sentiment. However, broader market participation remained relatively weak compared with the benchmark indices,” said Pabitro Mukherjee, deputy vice-president of research at Bajaj Broking.
The scale of the advance was striking. In seven sessions, the Nifty 40 gained 1,977.25 points, against a rise of just 432 points over the whole of October. Between the October 30 close and November 6, the combined market capitalisation of Nifty 50 companies increased by ₹14.83 trillion to ₹200.81 trillion, an increase of about 8%. Private-sector banks accounted for ₹3.23 trillion, or 22 per cent, of the increase.
“Overall, this is a secular rally and not really associated with any sector or segment. Over the past three months, the market has been correcting, but positive mid-term results and crude oil staying low have been the biggest contributors,” said Shai Coelho, founder of Vtrender, a quantitative derivatives trading firm.
Short-covering adds to the advance
The derivatives market suggests that the rally was fuelled partly by the unwinding of bearish positions. Nifty futures rose 8.4 per cent over the week, while open interest — the number of outstanding contracts — declined 17.6 per cent. The combination of rising prices and falling open interest is a typical indication of short-covering.
On Friday, FPIs bought ₹13,749.82 crore of equities, while DIIs sold ₹5,968.7 crore. Over the week, FPIs also closed 103,315 Nifty 50 futures contracts, suggesting that investors who had previously built short positions to hedge their cash-market exposure were reducing those positions as the index moved higher.
“The FIIs are now getting confident about the Indian market, and that is why we are seeing some unwinding of futures positions in the derivatives market,” Coelho said.
Fund managers have become more optimistic about Indian equities, with some believing that the worst of the correction may be over. While crude prices remain a concern, expectations that the conflict involving the US and Iran will not escalate have also helped sentiment.
“Oil prices cooled off to under $100 this week, which brought positivity, along with strong earnings season and renewed FPI buying in the Indian markets. The US market corrections over AI and AI-related stock selloffs and an anti-AI sentiment, amid the Democrats dominating the US midterm elections also helped,” said Kranthi Bathini, equity strategist at WealthMills Securities.
Rupee climbs as crude retreats
The rupee gained 0.60 per cent vs the dollar on Friday to settle at 93.91, its strongest close since April 22, 2026. It opened at 94.49, compared with the previous close of 94.47, and touched an intraday high of 93.83 before giving up some gains.
Friday’s appreciation was the biggest single-day rise since October 12, when it gained 0.99 per cent. The rupee is also Asia’s best-performing currency in November, after having ranked second in October after the South Korean won.
Lower crude prices and increased foreign inflows into domestic equities supported the currency.
“The Indian rupee outpaced all of its Asian peers… Fuelled by heavy foreign inflows and sliding crude prices, market sentiment went into overdrive amid a parabolic rally in domestic equities sparked by the buzz around the ‘anti-AI’ trade and easing geopolitical uncertainties,” said Dilip Parmar, research analyst at HDFC Securities.
In the near term, spot USD/INR is expected to move lower, with support at 93.50 and resistance at 94.30, he added.
The currency’s appreciation came even as India’s foreign exchange reserves continued to decline. Reserves fell for an eighth consecutive week to $717.06 billion in the week ended October 30, down $2.7 billion. Foreign currency assets declined by $2.09 billion, while gold reserves fell by $559 million.
From their record high of $785.7 billion in the week ended September 4, reserves have declined by $68.7 billion over eight weeks, as the Reserve Bank of India sold dollars in the foreign exchange market to contain volatility.
Crude correction offers relief to India
The decline in crude prices has been an important positive for the Indian financial markets, given the country’s dependence on imported oil. The January 2027 Brent contract fell to $96.84 a barrel on Friday, from $98.29 on Thursday. It has retreated from $117.64 on October 30, following reports of diplomatic engagement between the US and Iran and the Democrats’ performance in the US midterm elections.
Spot crude prices also declined to $96.07 a barrel, compared with $98.69 on Thursday. Brent was trading at $98.26 a barrel at 6.15 pm IST on Friday.
The global benchmark experienced considerable two-way volatility on Friday, reversing from early highs after failing to sustain a move above the psychologically important $100-a-barrel mark. It subsequently fell to $97.311, according to Finrex Treasury Advisors.
The latest US midterm election results, which saw losses for President Donald Trump’s Republican Party, have raised hopes of a de-escalation in the US-Israeli war on Iran. A sustained fall in crude prices could provide relief to India’s oil import bill, inflation and the finances of state-run oil marketing companies (OMCs).
“It is difficult to predict the trajectory of crude price movement, but lower prices are always better for India, given the fact that we are a huge importer,” said Prashant Vasisht, senior vice-president and co-group head of corporate ratings at ICRA.
India’s crude oil imports remained broadly flat at about 122 million tonnes in the first half of FY27. However, the value of those imports stood at $90.6 billion, 47 per cent higher than in the corresponding period of the previous financial year.
The US midterm results could also reduce uncertainty over trade policy. Democrats are generally seen as less supportive of reciprocal tariffs, potentially lowering the risk of US action against India’s purchases of Russian crude.
“Given the high share of Russian crude in India’s oil imports, at least on the tariff front India can breathe easy,” Vasisht said.
For OMCs, however, the present price environment remains challenging. Even crude at around $94 a barrel earlier in the week was not particularly favourable for their margins. Brent’s subsequent recovery above $98 has added to the pressure, particularly as domestic retail fuel prices remain capped.
Under-recoveries on diesel and petrol stood at ₹12 and ₹9 a litre, respectively, in October. OMCs were also incurring losses of around ₹230-245 on every LPG cylinder. Their gross refining margins (GRMs) have remained constrained by the freeze in retail fuel prices. “…So, it is still a bad scenario for the OMCs as their financial position is still not in the positive territory,” Vasisht said.
The outlook for crude will depend on how geopolitical developments unfold. Prices had remained elevated when US-Iran diplomatic talks failed to make progress, even as most oil continued to pass through the Strait of Hormuz. The Houthis have also renewed attacks on Saudi oil infrastructure, adding to the uncertainty.
A further decline in crude prices would benefit OMCs, which are already absorbing substantial under-recoveries on petrol, diesel and LPG. A de-escalation in the conflict could also allow India to increase imports from West Asia, given the region’s geographical proximity.
Freight costs for bringing crude from West Asia to India are estimated at 40-70 cents a barrel, compared with $2.50-$4 a barrel for US crude. Before the conflict, India sourced 35-40 per cent of its crude imports from West Asia, Vasisht said.
However, lower crude prices may not necessarily be sustained even after the conflict is resolved. Strategic reserves held by several global companies have declined, and replenishment could generate additional demand for West Asian crude, keeping international prices elevated.
