By Analysis desk
March 2025 Market Efficiency Recap:
Indian equities witnessed a powerful rebound in March 2025, reversing the sharp correction seen within the previous months. The Nifty 50 climbed 6.31% in the course of the month, recovering a part of the 16% decline from its all-time excessive of 26,216 in September 2024 to the February 2025 low. The broader market outperformed the benchmark, with the Nifty Subsequent 50 gaining 10.55%, Nifty Midcap 100 rising 7.85%, Smallcap index up 9.50%, and the Microcap 250 advancing 6.19%. The restoration was broad-based, pushed by a mixture of easing world headwinds — together with softening bond yields and a weaker greenback — improved danger sentiment, and renewed international inflows. Technical elements like oversold circumstances and expectations of an earnings revival additionally aided the bounce-back.
FIIs, who had been web sellers within the early a part of March, turned aggressive patrons within the latter half, contributing $3.6 billion of web inflows. Total, FIIs invested $975 million in the course of the month, whereas DIIs added $4.3 billion, reflecting sturdy home participation. This turnaround in sentiment pushed FII shareholding in Indian equities to 16.8% in March, up from 15.9% in February.
Sectoral efficiency
March 2025 noticed sturdy sectoral positive factors, pushed by cyclical and government-linked themes. Defence and public sector enterprises led the charts, posting sharp double-digit returns. Power, commodities, railways, and capital markets additionally delivered sturdy efficiency, supported by elevated infrastructure spending and enhancing macro cues. On the flip facet, actual property funding trusts (REITs) had been the one notable laggards in the course of the month.
Over the previous 12 months, financials, healthcare, and choose manufacturing-linked sectors have proven regular efficiency, whereas pockets like media, oil & gasoline, and public sector banks trailed. When it comes to danger, sectors equivalent to metals and actual property continued to exhibit excessive volatility, whereas FMCG, healthcare, and pharma offered comparatively steady returns.
Valuations remained elevated in consumption-driven segments like durables and FMCG, whereas sectors equivalent to oil & gasoline and telecom appeared extra attractively priced. Moreover, segments providing constant money flows and wholesome dividend yields—like vitality and IT—remained in favour with long-term traders. Total, the sectoral pattern mirrored a stability between momentum-driven rallies and a selective seek for worth.
Within the following sections, we offer a extra complete examination and detailed insights of some main sectors:
Auto:
The auto sector wrapped up Q4FY25 with modest progress throughout key metrics. OEMs are anticipated to report YoY income, EBITDA, and PAT, respectively. The expansion was fuelled by mid-to-high single-digit quantity growth in two-wheelers, low-to-mid single-digit progress in passenger and industrial autos, and low-teens progress in tractors. Nevertheless, EBITDA margins are more likely to stay flat YoY, weighed down by greater reductions, promotional prices, and unfavorable working leverage, regardless of value hikes taken over the previous 12 months.
Sequentially, income/EBITDA/PAT are projected to rise with a modest 21 bps enchancment in EBITDA margins. Inside OEMs, TVS and Hero are anticipated to see YoY margin growth of ~77 bps and ~27 bps, respectively, whereas Bajaj could witness a ten bps contraction. Maruti’s margin is more likely to decline by 44 bps YoY on account of greater advert spends, deeper reductions, and a rising CNG combine. Escorts Kubota might even see a sequential margin dip owing to consolidation-related impacts, whereas Ashok Leyland is predicted to publish a 42 bps YoY margin uptick aided by price controls and working leverage.
For auto ancillaries, income and EBITDA are anticipated to rise YoY, supported by greater 2W and tractor volumes and premiumisation in PVs. QoQ, income and EBITDA could develop with margins increasing aided by steady commodity prices and working leverage. YoY PAT could stay flat on account of one-offs, although a ~14% sequential enchancment is predicted.
Section-wise, Endurance Tech is more likely to profit from stronger 2W manufacturing and ABS/alloy wheel ramp-up, whereas Automotive Axles might see ~3.5% YoY progress pushed by MHCV demand. Uno Minda could clock ~16% YoY progress, led by sturdy 2W volumes and new orders. Sansera Engineering might publish a ~5.4% YoY uptick, supported by aerospace and home 2W segments.
Enter prices largely remained steady, with flat metal and lead costs. Aluminium and copper costs rose ~2% QoQ, whereas palladium declined 4%. Rhodium rose ~6%, and platinum was regular.
Going ahead, tractors are anticipated to outperform supported by beneficial monsoons and rural restoration. 2Ws and CVs might even see low-to-mid single-digit progress, whereas PV gross sales could reasonable on account of a excessive base, barring contemporary traction from new SUV launches. Entry-level PV demand could stay tepid.
A big overhang is the proposed 25% tariff on all auto imports into the US, which incorporates Indian-made autos and elements. This transfer, if applied, might materially impression export volumes for a number of Indian OEMs and ancillary suppliers. The uncertainty round this commerce motion poses a draw back danger to FY26 earnings, particularly for corporations with significant US publicity.
Metals:
Indian metal costs noticed a pointy 7.7% MoM rise in March 2025, reaching ₹52,000 per tonne, whereas Chinese language metal costs declined by 1.1% MoM to $470 per tonne. On the uncooked materials entrance, coking coal costs dropped by 2.1% MoM to $139 per tonne — the bottom stage since Might 2021. In February 2025, India’s metal manufacturing declined 6.6% MoM to 12.7 million tonnes, whereas China’s estimated output dropped by 3.7% to 79 million tonnes. World metal manufacturing was additionally decrease by 4.4% MoM at 145 million tonnes. Though Chinese language metal exports declined 10% MoM, they nonetheless rose 12% YoY to eight million tonnes on account of sluggish home consumption. The current imposition of US tariffs is predicted to disturb world commerce flows, probably leading to diverted metal shipments discovering their approach into markets like India.
Metal uncooked materials costs: Home iron ore charges rose 4.3% MoM in March 2025 to ₹7,300 per tonne, whereas world costs slipped 1.5% MoM to $97 per tonne. Manganese additionally noticed a 3% MoM rise to ₹18,429 per tonne.
Non-ferrous metals: Aluminium costs dropped by 3.9% MoM to $2,518 per tonne owing to higher uncooked materials provide. In distinction, copper costs climbed 3.8% MoM to $9,710 per tonne, pushed by fears of commerce disruptions on account of US tariffs. Zinc rose 2.7% MoM, backed by industrial demand and output points from main producers.
The spike in Indian metal costs throughout March was largely as a result of proposed 12% safeguard responsibility. Nevertheless, the general impression could stay muted as this responsibility doesn’t apply to nations with which India has FTAs, like Japan, Korea, and Nepal — collectively accounting for over 60% of India’s metal imports in February 2025. In parallel, the massive upcoming capability additions within the home market are anticipated to maintain a lid on metal costs. On the worldwide entrance, mushy Chinese language demand and the US’s blanket 25% import tariff on metal might reshape commerce patterns, intensifying competitors in importing nations, together with India. Enter price pressures could stick with rising iron ore costs, although some aid could come from declining coking coal costs. Regardless of these combined cues, stretched inventory valuations proceed to restrict the sector’s upside potential. As such, we preserve a impartial stance on the metal house.
Chemical substances:
The chemical sector continues to witness a volume-driven restoration, though pricing stays beneath strain on account of subdued world demand, intensified competitors—particularly from China—and ongoing macroeconomic uncertainty. Within the March quarter, most firms are anticipated to report progress led by greater volumes, however margin enchancment could stay restricted on account of persistent pricing challenges. Whereas costs of many specialty chemical substances have stabilised, a sustained uptrend remains to be elusive.
Inside agrochemicals, a gradual however regular restoration is anticipated, aided by new product introductions and the rising shift towards sustainable agriculture. Quantity progress is more likely to achieve traction within the coming monetary 12 months, with firms investing in innovation to satisfy evolving farming wants. The pharma phase stays supportive of demand, as Indian drug makers scale up manufacturing to capitalise on alternatives arising from patent expirations.
Nevertheless, demand within the automotive and textile sectors stays uneven. The auto trade remains to be dealing with weak demand and provide chain constraints, which is affecting the consumption of chemical substances utilized in automobile manufacturing. A gradual restoration is feasible, although contingent on macroeconomic stability. The textile sector, however, is grappling with overcapacity and mushy export orders, creating a tricky pricing surroundings for associated specialty chemical substances. A rebound on this phase will probably hinge on world consumption developments.
Choose molecules like ATBS proceed to indicate structural energy, with wholesome demand and steady pricing supporting additional capability growth. In the meantime, segments like fluorochemicals have seen renewed curiosity following current value strikes, prompting the resumption of sure stalled growth tasks.
Total, specialty chemical firms are anticipated to publish sturdy topline progress supported by capability additions and diversification past agrochemicals. Nevertheless, margin pressures persist on account of an unfavourable product combine and subdued realisations. Whereas a couple of gamers are more likely to profit from segment-specific tailwinds in pharma, polymers, or superior intermediates, others could proceed to face headwinds in segments like SDAs or primary chemical substances.
Valuation-wise, most firms are buying and selling near their long-term averages, reflecting a cautious investor stance. Till pricing restoration turns into extra seen, margin pressures could persist, limiting near-term upside. For now, the main focus stays on firms displaying wholesome quantity traction, diversified product portfolios, and robust execution in high-growth segments.
Banking/Finance:
The Indian banking sector entered Q4FY25 dealing with headwinds from slowing financial momentum, muted authorities expenditure, and cautious regulatory stances on retail credit score dangers. Systemic credit score progress decelerated to roughly 11% YoY as of March 2025, down sharply from 20.5% in FY24. This moderation was largely pushed by a slowdown in unsecured lending, tighter liquidity, and efforts by banks to realign their loan-to-deposit ratios (LDRs).
Public sector banks remained extra aggressive in extending credit score, notably throughout retail, MSME, and company segments, whereas non-public banks prioritised deposit mobilisation and stability sheet self-discipline. Deposit progress additionally softened to 10.3% YoY, with continued strain on CASA (present and financial savings account) mobilisation and rising reliance on time period deposits. The hole between credit score and deposit progress narrowed considerably to simply 0.5% by March-end, in comparison with over 6% initially of FY25.
The Reserve Financial institution’s current 25 bps fee reduce initiated the easing cycle, and one other related reduce is anticipated. Nevertheless, the impact of decrease repo charges is predicted to weigh on yields, particularly for banks with the next proportion of floating-rate loans, whereas funding prices have remained agency. Because of this, web curiosity margins (NIMs) are more likely to contract by 4–12 foundation factors in Q4FY25. Bigger and PSU banks might even see marginal impression, whereas mid-sized banks and small finance banks might face sharper strain.
Payment earnings developments are anticipated to be wholesome, supported by seasonality, whereas treasury efficiency might range. Working bills are more likely to stay beneath management, and pre-provision working revenue (PPOP) is predicted to develop modestly. Asset high quality throughout most banks is seen holding regular, although mid-tier and smaller banks with greater publicity to microfinance and bank card portfolios could proceed to face stress. Slippages in unsecured segments stay a priority, and credit score prices are anticipated to rise sequentially by round 16%, probably capping total profitability positive factors.
Within the NBFC house, disbursement exercise picked up sequentially in Q4FY25, supporting sturdy progress in belongings beneath administration (AUM). Car financiers led the cost with AUM progress close to 22% YoY, whereas diversified financiers noticed round 26% progress. Margins stayed steady for housing finance gamers, with slight upward developments seen in automobile finance. Nevertheless, diversified and gold mortgage NBFCs could have skilled marginal NIM compression.
Asset high quality remained broadly steady throughout most NBFCs, although the microfinance phase continued to face elevated stress, notably in geographies like Karnataka. Whereas slippages remained excessive, there are early indicators that stress could also be plateauing. In distinction, reasonably priced housing financiers maintained wholesome disbursement momentum, with regular margins and enhancing asset high quality. Gold financiers confirmed muted AUM progress, however their core mortgage ebook remained sturdy. Diversified NBFCs and automobile financiers seem well-positioned for sustained earnings, supported by steady credit score prices and managed asset high quality metrics.
Wanting forward, investor focus will stay on deposit mobilisation developments, the trajectory of unsecured mortgage portfolios, and the potential impression of additional fee cuts on sectoral margins and profitability.
Necessary occasions & updates
A couple of necessary occasions of the final month and upcoming ones are as under:
- The RBI lowered the repo fee by 25bps to six% in April, marking a second consecutive reduce amid cooling inflation, slower progress, and world commerce tensions. It additionally trimmed the FY26 GDP forecast to six.5% and lowered inflation projections to 4%, staying inside its goal vary.
- US President Trump introduced a 90-day pause on the newly proposed reciprocal tariffs for all nations besides China, citing investor strain and bond market volatility. Throughout this era, a decrease 10% tariff will apply. Nevertheless, tariffs on China had been sharply raised to 125% on account of retaliatory actions and commerce tensions. The US goals to isolate China whereas negotiating separate commerce offers with different nations, together with India, which is working towards a partial bilateral settlement. India can also be pursuing commerce pacts with the EU and UK, whereas making ready stricter anti-dumping measures to counter Chinese language imports.
- India’s Manufacturing PMI for March 2025 was revised upward to 58.1, beating each the flash estimate (57.6) and February’s studying (56.3). This marks the strongest efficiency since July 2024, pushed by sharp rises in new orders, output, and buying exercise.
- India’s Composite PMI rose to 59.5 in March 2025, an eight-month excessive, pushed by the strongest manufacturing unit progress in 20 months and continued service sector growth.
- India’s Providers PMI was revised to 58.5 in March 2025, down from 59.0 in February, signalling a slight slowdown however marking 44 straight months of progress. Overseas gross sales grew at their weakest tempo since December 2023.
Basic outlook:
The RBI’s April financial coverage resolution marked a pivotal flip in its coverage course, with a 25 bps repo fee reduce to six% and a transparent shift in stance from ‘impartial’ to ‘accommodative’. This transfer builds on the sooner reduce in February and displays the central financial institution’s rising consolation with the inflation trajectory, permitting it to pivot in direction of supporting progress amidst rising world uncertainties.
The CPI inflation forecast for FY26 was revised all the way down to 4% from 4.2%, owing to elements like a beneficial rabi harvest, assumptions of a traditional monsoon, easing family expectations, and a excessive base from FY25. Meals and beverage inflation noticed a pointy decline, falling from 9.7% in October 2024 to three.8% in February 2025, the bottom since Might 2023. In the meantime, core inflation (ex-food and gasoline) inched up barely to 4% in February from 3.8% in January.
The RBI’s progress estimate for FY26 was trimmed to six.5% (from 6.7%), reflecting considerations about trade-related disruptions following the reciprocal tariff actions by the US, which pose important draw back dangers to India’s exports, notably in sectors like engineering items, electronics, pharma, and textiles. Nevertheless, home progress drivers equivalent to improved non-public consumption (city and rural), rising capability utilisation, authorities capex, and robust stability sheets of banks and corporates supply some resilience.
Importantly, the RBI has acknowledged the potential for one other 50 bps in fee cuts, ought to progress falter or inflation stay subdued. The actual coverage fee now stands at 2% (repo at 6% minus anticipated inflation of 4%), leaving sufficient room for alleviating. The central financial institution indicated that, beneath the accommodative stance, charges might even fall under the estimated impartial actual fee of 1.5%, if obligatory.
On the exterior entrance, India’s present account deficit stays modest at 0.7% of GDP for FY25. But, the stability of funds faces stress from risky capital flows, notably international portfolio funding (FPI) outflows of $18.9 billion between October 2024 and March 2025, reversing the inflows of $21.6 billion within the previous six months. These outflows have weighed on the rupee, which is additional uncovered to strain as a result of rate of interest differential with US Treasuries.
The RBI has been proactive in managing liquidity and sustaining monetary stability. It infused ₹6.8 trillion in sturdy liquidity from January to March 2025 by way of open market operations (₹2.8T), time period repo (₹1.8T), and USD/INR swaps (₹2.2T). Because of this, system liquidity moved into surplus by end-March, supporting credit score transmission and softer market charges.
In sum, the coverage outlook now prioritises sustaining the expansion restoration whereas remaining watchful of inflation dangers from forex depreciation, climate shocks, or geopolitical tensions. The RBI’s flexibility, backed by beneficial inflation dynamics and a reputable progress framework, units the stage for extra supportive coverage motion if wanted.
Technical outlook.
The Indian bond market has responded positively to the RBI’s dovish pivot. The benchmark 10-year G-Sec yield fell 21 bps YTD in 2025, bolstered by constant OMO purchases, falling crude oil costs (Brent down ~8.8% between Jan–Mar 2025), and softening US Treasury yields. With inflation anticipated to hover close to the 4% goal, and additional fee cuts probably, bonds are poised to increase their positive factors. Moreover, India’s inclusion in world bond indices has attracted $16.9 billion in web debt inflows YTD, enhancing help for sovereign debt devices.
Fairness markets, in the meantime, have seen important FPI outflows ($17.2 billion web YTD in equities), reflecting world danger aversion amid commerce tensions and financial divergence. Nevertheless, home institutional traders and a liquidity-friendly surroundings have helped cushion massive drawdowns. Charge-sensitive sectors equivalent to financials, actual property, autos, and shopper discretionary may benefit from decrease borrowing prices and a rebound in credit score demand.
Regardless of macro headwinds, the home demand story stays intact, with sturdy retail gross sales, a pick-up in housing and automobile registrations, and robust financial institution credit score progress. These fundamentals, coupled with RBI’s supportive coverage measures, might set off a aid rally in equities, particularly in segments aligned with home consumption and infrastructure.
On the forex entrance, the INR stays weak on account of capital outflows and exterior uncertainties. Nevertheless, RBI’s lively interventions by way of USD/INR swaps and bond purchases have up to now stabilised the rupee inside a manageable band. In response to the Financial Coverage Report, a 5% depreciation within the INR from the baseline (₹86/USD) might increase inflation by 35 bps, a danger the central financial institution is monitoring intently.
From a technical standpoint, the Nifty and Sensex have entered a consolidation section following current volatility. Key help for the Nifty lies close to 21,700–21,800, whereas a decisive breakout above 23,200 might set off short-term upside, main resistance leve is 23800. For bond markets, continued RBI help suggests decrease yields within the medium time period, making long-duration bonds engaging.
Outlook for the World Market
US Market:
The US financial system is getting into a difficult section as sweeping new tariffs, introduced in early April, set off a major shift within the macroeconomic surroundings. The efficient tariff fee has surged from round 2% final 12 months to over 20% at this time—the best stage seen in additional than a century. These measures, which embrace a ten% common import tax and reciprocal tariffs starting from 11% to 50% on choose buying and selling companions, now cowl practically 80% of US imports. Whereas some moderation is predicted, with the efficient fee probably settling round 15% by way of 2026, the near-term impression is clearly stagflationary.
The speedy consequence of this coverage shift is a pointy rise in inflation. Core PCE inflation is projected to climb to three.3% year-over-year by the top of 2025, with value pressures concentrated in items on account of rising enter and completed product prices. Companies are presently working by way of inventories stockpiled forward of the tariffs, however as these buffers fade, value hikes are more likely to intensify. Whereas providers inflation could also be extra muted on account of softer labour and demand dynamics, total inflation is predicted to remain properly above the Fed’s 2% goal by way of 2026.
Client sentiment has already taken successful. Confidence indicators fell sharply in March, reaching a 12-year low amid rising considerations over tariffs and enterprise circumstances. Actual shopper spending declined 0.6% in January and posted solely a 0.1% achieve in February, pointing to Q1 being the weakest quarter for consumption since 2020. A quick pick-up in big-ticket gross sales is feasible in Q2 as shoppers rush to beat value will increase, however it will probably be short-lived. By the second half of the 12 months, consumption is predicted to contract extra broadly, particularly for sturdy items.
The enterprise funding outlook has additionally dimmed. Gear spending noticed a brief enhance in Q1—largely on account of a rebound in plane shipments and pre-tariff buying—however capital expenditure is predicted to weaken considerably going ahead. Uncertainty round commerce and monetary coverage is paralysing long-term planning. Mental property funding could stay comparatively steady, however broader capex is about to say no.
The labour market, although nonetheless holding up, is starting to indicate pressure. Hiring intentions amongst small companies have dropped, job openings are trending decrease, and survey knowledge recommend weaker employment throughout each manufacturing and providers. Mixed with efforts to shrink the federal workforce, layoffs are projected to extend. Nonfarm payrolls are anticipated to fall by a median of fifty,000 jobs monthly in H2, pushing the unemployment fee as much as round 4.7% by early 2026. A gradual labour market restoration is anticipated in 2026 as decrease rates of interest and monetary stimulus start to help demand.
On the coverage entrance, the Federal Reserve is strolling a tightrope. Whereas inflation is rising, it’s largely seen as transitory and pushed by supply-side elements. The Fed is predicted to start chopping charges from June, with 5 25 bps reductions projected by year-end, bringing the federal funds fee down to three.00%–3.25%. Quantitative tightening is more likely to proceed by way of 2025 earlier than halting. Treasury yields are forecast to climb modestly, reaching 3.75% by December and 4.15% by end-2026, reflecting inflation danger and monetary uncertainties.
When it comes to fiscal coverage, Congress is eyeing tax cuts and new spending measures, although their results could not materialise till 2026. In the meantime, greater tariff revenues might modestly delay the looming debt ceiling “X date,” now anticipated round August.
In abstract, 2025 is shaping as much as be a turbulent 12 months for the US financial system, with elevated inflation, weakening progress, and heightened coverage uncertainty. The mixture of rising prices, cautious shoppers, and a softening labour market factors to a stagflationary backdrop. Whereas coverage easing could supply some aid, a extra sturdy restoration is predicted to unfold solely in 2026, as soon as inflation cools and monetary stimulus begins to take impact.
Outlook for Gold
Gold costs in India surged dramatically on April 10, with 24K gold in Delhi spiking by ₹29,400 per 100 grams in a single session. The value for 10 grams of 24K gold is now hovering simply ₹6,500 shy of the ₹1,00,000 milestone—a psychological stage that’s drawing consideration throughout markets. This sharp uptick coincided with Mahavir Jayanti, a festive interval when gold demand historically sees a lift on account of cultural and seasonal shopping for patterns.
Nevertheless, the home rally is intently tied to world elements. Worldwide gold costs spiked in response to heightened geopolitical tensions, notably the renewed commerce conflict rhetoric between the USA and China. A sudden escalation got here after the US introduced a hike in tariffs on Chinese language imports, rising them from 104% to 125%. Though a 90-day pause was launched for tariff hikes on different nations, investor sentiment had already shifted considerably.
The worldwide monetary surroundings is more and more risk-averse. Fears that aggressive tariff measures might spur inflation and dampen world progress have pushed traders away from equities and industrial commodities. As an alternative, capital is flowing into safe-haven belongings like gold, which tends to outperform in periods of uncertainty.
Wanting forward, the outlook for gold stays constructive within the medium time period. Demand in India is more likely to keep elevated by way of the continuing festive season and into the marriage months. Globally, if geopolitical friction and financial coverage shifts proceed to drive volatility, gold might preserve its upward trajectory. Whereas short-term corrections are potential, the underlying drivers of inflation fears, forex instability, and monetary market stress proceed to make gold a lovely hedge in investor portfolios.
What ought to Traders do?
We proceed to observe a staggered funding technique in Indian equities, specializing in high-quality firms with sturdy fundamentals. Nevertheless, we’re holding again from aggressive allocations and adopting a extra measured stance till there may be larger readability on company earnings and coverage course.
Alternatively, we now have paused contemporary investments in US equities. Whereas the current 90-day pause in US tariffs presents non permanent aid, it doesn’t handle the underlying macroeconomic challenges. The tariff on Indian exports stays elevated at 26%, and the sharp hike in tariffs on Chinese language items to 125% provides additional uncertainty. These developments are already weighing on key Indian export sectors like IT, pharma, and autos.
Although the short-term tariff pause could ease speedy pressures, the broader surroundings stays fragile—particularly with China excluded from the aid and the US election cycle including to coverage unpredictability.
At residence, we’re intently monitoring the upcoming This autumn outcomes to gauge developments in consumption, rural demand, and company profitability. The RBI’s downgrade of progress projections and sustained FPI outflows are clear indicators of cautious sentiment within the close to time period.
Disclaimer:
This text shouldn’t be construed as funding recommendation, please seek the advice of your Funding Adviser earlier than making any sound funding resolution.
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