Weekly Wrap-Up

Market Moves

Indian Market Summary – Nifty Extends Rally with Strongest Weekly Performance Since 2021

The Nifty continued its bullish momentum for a fifth consecutive session, climbing 159 points (0.69%) to close at 23,350 on Friday. For the week, the Nifty delivered an impressive 4.26% gain, marking its strongest weekly performance since February 2021.

The weekly performance was particularly noteworthy across all major indices. The Nifty surged 953.20 points (4.26%), while the Sensex climbed 3,076.60 points (4.17%). Even more impressive were the gains in the mid and small-cap segments, with the Midcap 100 index rising by a remarkable 7.74%—its strongest weekly performance since April 2020—and the Smallcap 100 index soaring 8.64%, marking its most substantial weekly gain since June 2020.

Foreign Institutional Investors (FIIs) reversed their recent selling trend, becoming net buyers during the week with purchases worth Rs 5,819 crore, though much of this buying was attributed to passive inflows from index rebalancing. For the year to date, FIIs remain net sellers of shares worth Rs 1.57 lakh crore, while Domestic Institutional Investors (DIIs) have maintained their support with net purchases of Rs 1.81 lakh crore.

The Indian rupee continued its upward trajectory, strengthening for the eighth straight day. It appreciated by 40 paise to 85.97 against the US dollar—a two-and-a-half-month high—driven by a weakening dollar, strong foreign capital inflows, and the buoyant equity markets.

Global market summary – U.S. Market Weekly Recap: Fed Decision Propels Markets Higher

U.S. stocks concluded the week on a positive note, successfully breaking their multi-week downward trend. The market rally gained momentum after the Federal Reserve maintained interest rates at their current levels, aligning with widespread market expectations.

Investors responded favourably to the Fed's announcement that it would decelerate its quantitative tightening (QT) program beginning in April, reducing the pace at which it shrinks its Treasury securities holdings. This policy adjustment provided a significant boost to market sentiment. The central bank maintained its benchmark policy rate within the 4.25%–4.5% range, offering stability in the monetary landscape.

Federal Reserve officials reaffirmed their projection for 50 basis points (0.5 percentage points) of rate reductions during the current year, consistent with their previous forecast from December. The positive market reaction likely stems from relief regarding the Fed's stance on potential tariff-induced inflation. Fed Chair Powell specifically addressed these concerns by emphasizing the central bank's view that any inflationary impact from tariffs would likely be transitory rather than persistent. This characterization suggests the Fed doesn't anticipate needing to maintain higher rates for longer to combat tariff-related price pressures.

It's worth noting, however, that Fed policymakers simultaneously revised their inflation expectations upward for 2025 while reducing their projections for gross domestic product (GDP) growth. This adjustment signals that while the Fed remains committed to its rate-cutting trajectory, it acknowledges the potential for economic headwinds and lingering inflation challenges in the medium term. This nuanced policy stance—maintaining rate cut projections while acknowledging inflation risks—demonstrates the delicate balance the Federal Reserve is attempting to strike between supporting economic growth and ensuring price stability as the economy navigates through uncertain terrain.

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Economic Data Indicator

India

• India’s wholesale prices climbed by 2.38% yoy in February 2025, accelerating from a 2.31% rise in January. Monthly, wholesale prices edged up 0.06%, the first increase in four months, after an upwardly revised 0.64% decline in January.
• India recorded a trade deficit of $14.05 billion in February of 2025, narrowing from the $18.7 billion deficit of the corresponding period of the previous year. Purchases of foreign goods sank by 16.3% annually to $50.96 billion. In the meantime, exports dropped by a slightly softer 10.9% annually to $36.91 billion.

US

• The number of Americans filing new applications for unemployment benefits increased slightly last week, Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 223,000 for the week ended March 15.
• The U.S. current account deficit contracted in the fourth quarter, the current account deficit narrowed $6.3 billion, or 2.0% to $303.9 billion.
• Retail Sales in the United States increased 3.1% year-on-year in February 2025, following a downwardly revised 3.9% rise in January.
• U.S. existing home sales unexpectedly increased in February. Home sales rose 4.2% last month to a seasonally adjusted annual rate of 4.26 million units.
• Building permits in the United States fell by 1.2% to a seasonally adjusted annualized rate of 1.456 million in February of 2025, slightly higher than market expectations of 1.450 million.
• Housing starts in the US unexpectedly soared 11.2% month-over-month to a seasonally adjusted annualized rate of 1.501 million in February 2025, way above a downwardly revised 1.35 million in January.
• Industrial Production in the United States increased 1.4% year-on-year in February 2025, following a downwardly revised 1.9% rise in January.

UK

• British factories have reported a downturn this month. The CBI’s monthly balance for manufacturers’ output expectations over the next three months dipped back into negative territory at -2 in March after climbing to a three-month high of +8 in February.

Eurozone

• Euro zone consumer confidence fell by 0.9 points in March from the February number, euro zone consumer morale worsened to -14.5 this month from -13.6 in February.
• The first estimates of euro area balance showed a €1.0 bn surplus in trade in goods with the rest of the world in January 2025, compared with +€10.6 bn in January 2024. Exports were €232.6 billion, an increase of 3.0% YoY while imports increased 7.6% to €231.5 bn.
• The ZEW Indicator of Economic Sentiment for the Euro Area rose by 15.6 point from the prior month to 39.8 in March 2025, the highest in eight months.

Germany

• The ZEW Indicator of Economic Sentiment for Germany jumped to 51.6 in March 2025, the highest level since February 2022, compared to 26 in the previous month.

Japan

• Japan’s core inflation hit 3.0% in February and an index stripping away the effect of fuel rose at the fastest pace in nearly a year, a sign of broadening price pressure that reinforces market expectations of further interest rate hikes.

China

• China's retail sales rose by 4.0% yoy in the first two months of 2025, quickening from a 3.7% growth in December, in line with market forecasts.
• China's surveyed unemployment rate edged higher to 5.4% in February 2025 from 5.2% in the previous month.

In the limelight – National military budgets (US $ billion)

Concerns about shifts in U.S. foreign policy and security commitments are prompting European nations to bolster their own defense capabilities. This is leading to increased investment in their own militaries. The global security landscape, including the ongoing conflict in Ukraine, is amplifying the need for increased defense spending across Europe, and the uncertainty of U.S. involvement in NATO, is contributing to that.

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Market Outlook – Beyond tax loss harvesting, Q4 Earnings Will Shape market trajectory.

As we approach the end of the financial year, some investors may choose to strategically sell underperforming investments to realize capital losses, which can then be used to offset capital gains realized elsewhere in their portfolio, thereby reducing their overall tax liability for the year.

For the week, the Nifty delivered an impressive 4.26% gain, marking its strongest weekly performance since February 2021. We are witnessing a strong rebound in sectors where earnings trajectories remain intact, as evidenced by market performance over the past few days. The upcoming Q4 FY25 earnings reports are expected to show robust results, potentially lifting the overall market sentiment.

After the recent sharp rally, we may experience several weeks of consolidation before markets target higher levels. Market analysts project Nifty earnings growth between 12-15% for both FY26 and FY27. Based on these projections, both major indices and mid/small-cap stocks have become attractive investment opportunities following their recent steep corrections. Smaller stocks deliver higher returns, but this potential comes with inherently increased risk and volatility. These segments tend to amplify both market upswings and downturns compared to their large-cap counterparts.

India's long-term structural growth narrative remains compelling, and the recent sharp market correction has transformed previously stretched valuations into more reasonable territory.

Investors must adhere to a clearly defined asset allocation strategy aligned with their personal risk tolerance and return objectives. This requires regular portfolio reviews, deepened understanding of equity market dynamics, continuous development of investing skills, and rational expectations about potential outcomes. When allocating capital to any particular asset class or market segment, thorough due diligence becomes essential for long-term success.