I place a limit order and someone instantly places an order 1 tick size better than my order. Why?

Algorithmic trading accounts for a sizeable portion of the traded volumes on stock exchanges all over the world. In the context of India, this is also accurate. The "Active Relative Algorithm" is one such algorithm.

An active relative algorithm is utilized when an algorithmic trader aims for a more aggressive price than the optimum bid and offer price. The order price is automatically modified as the market changes to maintain the orders' aggressiveness. As a consequence, the algorithm will try to put an offer that is a few tick sizes better than your order whenever you place a bid or an ask. On the NSE and BSE, the typical tick size is Rs. 0.05.