Indian Stock Market Cools Off After 7-Day Rally: What’s Next for Sensex and Nifty 50?

Profit booking hits markets amid global uncertainty, but long-term outlook remains strong with signs of recovery and FPI confidence.

March 26, 2025: After rallying nearly 7% this March, Indian stock market indices Sensex and Nifty 50 have entered a phase of profit booking, slipping in two consecutive sessions. Around midday on Wednesday, March 26, both indices were trading in the red, signaling a breather in the recent bullish run.

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The rally earlier this month came on the back of a rebound from last year’s weakness, driven by improving economic indicators and renewed foreign investor interest. Between March 20 and 25, foreign portfolio investors (FPIs) poured over ₹19,000 crore into Indian equities, reinforcing optimism about the market’s long-term trajectory.

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Why Are Markets Falling Now?

Experts cite profit booking, global uncertainty over US tariffs, and concerns about Q4FY25 corporate earnings as key reasons behind the recent dip. There’s also growing speculation that China’s equity market, with more attractive valuations, could draw some capital away from India.

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Bloomberg reported that Morgan Stanley has raised its outlook for Chinese stocks, citing potential earnings growth. However, Indian market experts remain confident that this “buy China, sell India” trend is temporary and tactical.

Will China’s Comeback Hurt Indian Markets?

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, structural issues in China and trade tensions with the US limit its long-term appeal. He emphasized that similar trends have emerged in the past, but India’s macroeconomic stability and reforms have continued to attract FPI flows over the medium to long term.

G Chokkalingam, Founder of Equinomics Research, also believes China’s exposure to US trade risks outweighs any temporary investor preference, and India’s fundamentals remain more attractive.

What Lies Ahead?

Despite near-term volatility, experts maintain a positive outlook on Indian equities:

• Q4FY25 earnings may stay subdued, but recovery is expected from Q1FY26.
• Inflation has dropped below 4%, increasing the chance of an RBI rate cut in April.
• Fiscal stimulus, including ₹1 lakh crore in tax relief from Budget 2025, could further fuel economic activity.
• GDP growth of 6.5% and double-digit earnings in FY26 remain realistic targets.

There’s also cautious optimism around India-US negotiations, with hopes that President Trump may soften tariff policies, offering relief to emerging markets like India.

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