Resilient Rally Amid Uncertainty

The Indian markets sustained their upbeat investor sentiment over the past fortnight, driven by multiple factors. A key catalyst has been the growing expectations among analysts that the Reserve Bank of India (RBI) may cut repo rates in its April policy review, considering its liquidity stance and the evolving global dynamics. Additionally, the U.S. Federal Reserve’s decision to maintain its policy rate has sparked fresh discussions on central bank responses worldwide. Experts suggest that the combination of higher inflation and a lower GDP growth forecast in the U.S. could work in favour of emerging markets like India, driving increased capital inflows and bolstering the rupee.

This shift is evident in foreign institutional investors (FIIs) emerging as net buyers after a prolonged period, investing ₹23,245 crore in equities. Meanwhile, domestic institutional investors (DIIs) maintained their support, infusing ₹11,135 crore despite instances of profit booking. The rupee strengthened during the consecutive sessions, recording one of its best monthly gains in recent times. The Indian benchmarks witnessed a robust rally in the first week, gaining more than 4 per cent. However, the momentum eased in the second week amid partial profit booking and uncertainties surrounding potential tariffs by the Donald Trump administration.

The broader markets saw strong buying interest, with the BSE Mid-Cap Index and the BSE Small-Cap Index each surging over 6 per cent. Across the sectors, all the indices ended the fortnight in green territory, with banking, power, and oil and gas emerging as the top performers.Renewed foreign portfolio investments particularly boosted heavyweight financial stocks, signalling a revival in investor confidence in the banking sector. Additionally, expectations of interest rate cuts strengthened the sentiment, as lower rates are expected to drive credit growth and enhance profitability in the financial space.

Sizeable inflows from the FIIs, who turned net buyers after a prolonged period, along with expectations of a rate cut in the RBI’s April policy, fuelled the market’s continued uptrend

The banking sector, as a result, witnessed increased buying activity, as investors seized opportunities in undervalued stocks. The power sector stocks soared in line with seasonal trends, driven by a sharp rise in electricity demand during the summer months and improved profitability. The automotive sector index, despite a strong rebound at the beginning of the fortnight, pared more than half its gains.This was largely impacted by U.S. President Donald Trump’s decision to impose a 25 per cent tariff on automotive imports, a move that could weigh on Indian companies, particularly automotive parts exporters. Keeping a close watch on the markets is crucial, as several key factors will influence market movements and investment decisions. These include FY25 corporate earnings, future growth outlooks, the RBI MPC’s stance on rate cuts, and the impact of Trump’s reciprocal tariffs on India. Stay tuned for further updates.