Are The Markets Turning Green Again?

After undergoing a significant correction, the Indian equity markets appear to have stabilised at the current levels, showing resilience despite the broader weakness in the global markets caused by concerns over a potential tariff war and recessionary fears in the U.S. While Wall Street’s benchmark Nasdaq Composite index plunged over 8 per cent during the fortnight, the BSE Sensex and Nifty 50 managed to close in green territory, albeit with modest gains.

Meanwhile, the broader indices witnessed a sharp rebound but later trimmed some of their gains. However, they still managed to sustain investor optimism. On the sectoral front, the revival of investor optimism was evident, as all the sectoral indices, except for the information technology sector, ended the period with gains. The BSE Information Technology index declined by 3.5 per cent during the fortnight, impacted by weak sentiment surrounding the global IT equities amid the evolving industry landscape and increasing competition from DeepSeek

Meanwhile, the power, metal, and oil and gas sectors attracted the most buying interest, reflecting renewed investor confidence in these segments. Foreign institutional investors (FIIs) offloaded equities worth ₹21,200 crore, while domestic institutional investors (DIIs) emerged as the market saviours, infusing ₹26,500 crore and providing crucial support to the market. Several factors may be seen as signs of a potential market reversal, holding the capacity to uplift the currently struggling markets.

The most crucial among them is India’s retail inflation, which eased to a seven-month low of 3.61 per cent in February, as food inflation moderated below 4 per cent for the first time in nearly two years. This development has reinforced expectations of a back-toback rate cut in the Reserve Bank of India’s (RBI) upcoming April meeting, providing a positive outlook for economic growth. In addition, data released by the Ministry of Statistics and Programme Implementation showed that India’s industrial output, as measured by the Index of Industrial Production (IIP), recorded a growth of 5 per cent in January, improving from 3.5 per cent in December 2024.

Easing inflation, which has heightened expectations of further rate cuts, a surge in industrial output, the RBI’s liquidity infusion, and a weakening dollar index could all signal a potential market reversal

Further bolstering liquidity conditions, the RBI announced its plan to infuse ₹1.9 lakh crore into the banking system through open market purchases of government securities and USD-INR swaps in March. This initiative is expected to enhance liquidity and stimulate credit growth, providing additional support to the financial markets. Also, a significant decline in the dollar index bodes well for the Indian equity markets, as it enhances the appeal of emerging market assets, including Indian equities, to foreign investors, thereby driving higher capital inflows. Do you believe better days lie ahead for investors? Stay tuned for further updates.