Dear Investors,
The Nifty bounced by 6% from the February 2025 lows, closing the financial year above 23,000 level. The Sensex closed FY 2024-25 above 77,000 levels. The market recovery was broad based with Nifty 500 gaining 7.3% in March. The broader market outperformed large caps, with midcaps gaining 8% and small caps gaining 9% in March 2025. Heavy FII selling pressure reduced in March, with net sales of around Rs 4,000 crores versus nearly Rs 35,000 crores of net sales in February. Though the market bounced back, the valuations across all market cap segments are still much lower than the levels we saw in September 2024
The biggest risk factor is the impact of the trade policies of Trump Administration on the global economy. After announcing 25% tariffs Canadian and Mexican exports to the United States and additional 10% tariffs on imports from China, the US Government will announce a new set of tariffs on US trade partners. European Union has warned the United States that it will retaliate with counter tariffs and there is real risk of the tariffs and counter tariffs escalating into a global trade war.
Tariffs and counter tariffs are likely to lead to inflation and reduced consumption demand, affecting the global economy and investor risk sentiments. In the short term, we are likely to see risk-off sentiment in the market until we get more clarity.
The 10-year G-Sec yield eased by 14 bps on a month-on-month basis. The 364 Day Treasury Bill yield fell by 7 bps. The yield curve has been steepening. WPI inflation spiked in February, but inflation is expected to cool down in coming months. Cooling inflation and slowing GDP growth will set the stage for more rate cuts by the RBI.
Gold prices rallied by 4.6% due to economic uncertainties. Silver crossed Rs 1 lakh / kg level. Crude prices rose and supply of US crude oil tightened due to falling inventories. prices rose and supply of US crude oil tightened due to falling inventories.
The dollar has been weakening, due to the concerns about global trade war. Counter tariffs on American exports by United States’ trade partners like EU, Canada, Mexico, China etc. will make US exports more expensive / less competitive. This will have an impact on the US dollar. The INR appreciated by 2% against the USD in March.
Valuations have come down significantly off their peaks and the February lows made by the market can serve as a support level across different market cap segments. Investors can use volatility to tactically add equity to their asset allocation at attractive valuations by buying on dips. However, in times of economic uncertainties, you should be selective and focus on quality, as well as asset allocation.
The impact of trade wars on Indian economic growth will be relatively less compared to export-oriented economy like China. This may put India in a favourable position in the EM basket for FIIs. Investors should also maintain a long-term view, as far as investments are concerned. You should ensure asset rebalancing to avoid excessive risks in your portfolio.
Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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