From foreign investor confidence to valuation comfort and rate cut hopes, here’s what’s fueling the Indian stock market’s impressive rebound.
March 21, 2025: The Sensex has rallied over 3,000 points in just five trading sessions, and the Nifty 50 has jumped over 4%, signaling strong market optimism despite global economic uncertainty. On Friday, March 21, the Sensex closed 557 points higher at 76,905.51, and the Nifty gained 160 points to end at 23,350.40.
Here are 5 key reasons driving this strong market performance:
1. Foreign Investor Sentiment Turning Positive
After months of steady outflows, foreign portfolio investors (FPIs) have turned buyers, infusing ₹1,463 crore on March 18 and ₹3,239 crore on March 20 in the cash segment. The reduction in short positions and renewed buying in futures have also boosted confidence among retail investors, especially in small and mid-cap stocks.
“FIIs buying and reduced short positions gave retail investors a much-needed push,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
2. Valuation Comfort Attracting Bottom-Fishing
The Sensex’s P/E ratio has dropped to 21, below the 2-year average of 23.6, indicating improved valuations, especially in large-cap stocks. After correcting 15% from its peak in September 2024, investors now find attractive entry points.
Also Read: RBI Rate Cut in April? Experts Weigh In After US Fed Holds Interest Rates
“It’s a good time to build your portfolio with large and mid-caps,” noted Jayesh Faria of Motilal Oswal Private Wealth.
3. Economic Data Boosting Confidence
India’s retail inflation dropped to a 7-month low of 3.61% in February, while the IIP rose to 5% in January, indicating industrial growth momentum. Rating agencies like Fitch expect India to grow at 6.5% in FY26, relatively insulated from global shocks like US tariff policies.
4. Rate Cut Expectations
While the US Federal Reserve held interest rates steady, it signaled two rate cuts in 2025. Similarly, the RBI is expected to cut rates by 25 bps in April, encouraged by falling inflation and the need to support domestic growth.
5. Optimism Around Earnings Revival
Markets are looking forward to a 12–14% earnings growth in the next 12 months, with a stronger revival from Q1 FY26. Analysts believe this expectation is fueling forward-looking optimism in the market.
“The rally could sustain as markets anticipate stronger earnings ahead,” said Chakri Lokapriya, CIO, LGT Wealth India.
Overall, a combination of foreign investor return, valuation comfort, macro stability, policy easing, and corporate earnings optimism is propelling Indian markets into bullish territory—and experts believe the momentum could continue in the near term.
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