Bulls take charge! Can Indian stock market end 5-month losing streak in March?

Indian stock market: March provided a much-needed boost to the Indian stock market, as frontline indices rebounded after facing a sustained bearish downturn since October, which had pushed them to a nine-month low. Both Nifty 50 and Sensex have gained over 3% so far this month, and if the momentum continues until the end of March, it will help the indices break their five-month losing streak.

Notably, the rebound came even as overseas investors remained net sellers in the current month. However, the pace of selling slowed compared to previous months, with continued support from domestic institutional investors absorbing the impact of FPI outflows.

History also provides reason for optimism. Over the past 30 years, the three key indices—Nifty 50, Sensex, and Nifty 500—have faced significant corrections in eight instances. However, in 22 out of those 30 years, they have demonstrated resilience, maintaining their upward trajectory.

On the other hand, March has historically been a strong month for market recoveries, averaging a 1.7% gain since 2009 (excluding the 2023 outlier plunge).

Sustained sell-off pushes large-cap valuations closer to fundamentals

The extended sell-off on Dalal Street has pushed stocks into oversold territory, drawing renewed investor interest. As large-cap valuations realign with fundamentals, improving sentiment and liquidity measures from the Indian central bank to stimulate growth are encouraging the stock market bulls to return, particularly to financial stocks at lower levels.

The softer-than-expected inflation in February also raised hopes that RBI may announce a second rate cut in its upcoming policy meeting. On the global front, fears linger that Trump may announce reciprocal tariffs on India, as he has repeatedly referred to the country as one of the highest-tariff nations and claimed that selling products in India is relatively difficult.

In response, the Indian government is actively engaging with the Trump administration to prevent the imposition of reciprocal tariffs on Indian exports. However, analysts suggest that even if reciprocal tariffs are implemented on India, the impact would be minimal given the country’s limited export dependence on the US.

Additionally, the sustain drop in crude oil prices is providing support, as India meets 85% of its crude requirements through imports. The sharp correction in the US Dollar Index, which is now trading near a five-month low, is also fueling a rally in domestic stocks.

Meanwhile, analysts believe that the dollar’s decline could limit capital inflows back into the world’s largest market and benefit emerging markets. In another positive sentiment, global brokerage firms remain bullish on India.

Morgan Stanley recently stated that reciprocal tariffs will likely pose only a minor risk, while adding that valuations in large caps have turned attractive after the recent dip.

Another global brokerage firm, Jefferies, also stated that historically, India tends to outperform other emerging markets within 90-180 days following a period of underperformance. It noted that the country’s valuation premium is now closer to average levels, well below its 2024 peak.

Citi in late February has upgraded its rating on India to ‘Overweight’ from ‘Neutral,’ expecting Nifty 50 to touch 26,000 by December 2025.

Will the market rally continue?

Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The positive domestic macros favor continuation of the rally. If FIIs continue to buy, the rally can be sustained, but it remains to be seen. The external factors continue to be negative and hugely uncertain. April 2nd and reciprocal tariffs are not far away. The market will be weighed down by the uncertainty on that front.”

“A significant feature of yesterday’s rally is that it was led by fairly valued, domestic-focused segments like leading financials. This trend can continue. Beaten down stocks in the mid and small-cap segments also have bounced back. There is more steam left in this segment, too, even though the valuations in the broader market continue to be high. Investors can wait for better clarity to emerge on the sustainability of the ongoing trend. Domestic-focused themes continue to be safe bets,” he further added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.