The Month that was : March 2025

Equity markets rebounded strongly in March with Nifty50 Index gaining 6.3% after five consecutive months of decline. Mid-cap and small-cap indices also gained 7.8% and 9.5%, respectively. Except IT, which declined by 1.5%, all sectors ended in green. Power, PSU, capital goods, oil & gas, and metals were the leaders. Market sentiment remained cautious due to lingering concerns over US trade policies under President Trump. Optimism improved following the Federal Reserve's indication of two potential rate cuts this year, alongside a notable improvement in foreign inflows. Brazil, India, and Indonesia posted gains of 7%, 6%, and 4%, respectively, while Taiwan, the US, and Malaysia saw declines of 6%, 6%, and 4% respectively.

Key developments during the month included the FOMC keeping policy rates unchanged at 4.25-4.5%, retaining projections of two rate cuts in 2025. On the economic front, February's Consumer Price Index (CPI) inflation in India eased to 3.6% from 4.3% in January, mainly due to moderating food prices while Industrial Production (IIP) growth improved to 5% in January from 3.5% in December, reflecting a pickup in the manufacturing sector. FIIs bought USD737 million in the Indian equity market, while DIIs bought USD975 million during the month.

Market Outlook
While the market rebound in March provided some respite to market participants, sharp tariff hikes by USA on imports in early April has created uncertainty in equity markets globally. With retaliation by other countries looming large, growth prospects of USA and most other countries including India are expected to be adversely impacted due to the tariff hikes. Global supply chain and consumer behaviour may take a severe hit unless tariff hikes are rolled back soon. The policy action related to trade tariffs will be the single most important factor influencing global markets in near term. While risk-off sentiments globally will have a negative impact on the Indian equity market in the short term, we believe India will come out of this adverse situation relatively better than many other emerging countries. A strong domestic demand and a probable favourable outcome of trade negotiations between the USA and India should result in lesser impact on India's growth prospects in FY26. Amidst a volatile market environment investors are advised to remain selective, focusing on quality stocks in domestic oriented sectors such as power, banking, industrial and consumer discretionary, which are expected to benefit from domestic demand and falling commodity prices.

Happy Investing!