End of a volatile & eventful financial year, positive start for current FY, lessons & Investment strategies during uncertain times
Recap of performance in Mar’25 and current month
The Indian stock market has seen stability and recovery in last 2 months after back to back sharp corrections in preceding month till Feb’25. Nifty gained 6.3% in mar’25 and 3.5% in apr’25. Despite so much volatility, touching all time high and corrections in the financial year 2024-25, it closed the financial year with 5.3% positive return. It is still -7.5% down for all time high on nifty and even more in few sectors and mid-cap & small-cap. Nifty made a strong recovery after touching low of 21744 on 7th apr’25 and currently trading at 24336 i.e. 12% gain from low. Similarly Sensex recovered after touching low of 71425 on 7th apr’25 and currently trading at 80288 i.e. 12% gain from low. Indian market cap gained by 500 Billion USD in this period after touching low of 4.5 Billion USD and is back above 5 Trillion USD. It has been mentioned in previous articles about the nature of market, its volatility and mean reverting nature, hence it was a matter of time for market to stabilize and recover. Global markets especially US Markets saw very high volatility in Mar’25 and Apr’25 because of tariff and trade war. US market lost over 6 trillion USD from market cap in first week of Apr’25 due to tariff announcements, more details given separately. Few factors contributing to the recovery are tariff pause for 90 days for most countries, FII turning buyers after relentless selling till Feb’25 and reasonable valuations. Indian market underperformed most market till Feb’25 whereas it has now outperformed most market in last 2 months. However, there are still headwinds like corporate earnings results, rupee depreciation, fiscal deficit, inflation concerns, geo political risk, uncertainty on tariffs. Latest important concern in the list is the escalation and Indo Pak tensions amidst latest terrorist attack in Kashmir which has created country wide angst and uproar. Closely track all the events as this can have impact on the market.
Sectoral performance
The markets witnessed broad based recovery across sectors and market cap in last 2 months. Some sectors performed relatively better than others. The sectors which delivered best returns above 10% in mar’25 are Metals, PSU, Energy and Infrastructure and sectors which were laggard are IT, Auto and FMCG. The best performing sectors in current month delivering above 5% returns are Bank, FMCG and Media whereas laggard for current month are IT, Metals, Realty and Energy. Midcap delivered 8% and 3% respectively in Mar and Apr month whereas small cap delivered 9% and 3% during same period. Hence, review and rebalance the portfolio considering these factors, quality, valuations but also remain diversified from risk management perspective.
US Tariffs Announcement, Impact & Updates
Tariff announcement by US President Trump has shaken the global economy. On April 2—a day he called “Liberation Day”—Trump announced a minimum 10% tariff on all US imports, effective April 5, and higher tariffs on imports from 57 countries. The announcement of these controversially named “reciprocal tariffs” prompted retaliation from trade partners and triggered a stock market crash. Trade war escalated as China announces retaliatory measures against the US, while other economies seek dialogue with the White House. The numbers vary by country. The tariffs to be imposed will include 34% on all imports from China, 31% on Switzerland, 26% on India, 32% on Taiwan, 25% on South Korea, 36% on Thailand, 32% on Indonesia, 46% on Vietnam, and 49% on Cambodia. The tariff on imports from the United Kingdom, however, will be only 10%. Trump said that there will be a baseline tariff of 10% applied to all countries regardless of their trade policies.
The financial world has been rocked by an unprecedented market collapse following President Donald Trump’s aggressive trade policies, which have effectively formed economic barriers between the United States and its global partners. Over the two days, the US stock market suffered a steep decline, wiping out approximately $6.6 trillion in market value, according to The Wall Street Journal. Reuters reported that the S&P 500 alone has lost around $5 trillion in market capitalisation during this period. On April 4, the Dow Jones Industrial Average plummeted by 5.5 per cent, marking a two-day decline of over 4,000 points, including a staggering 2,200-point drop in a single day. The S&P 500 followed suit, shedding nearly 6 per cent, while the tech-heavy Nasdaq tumbled 5.8 per cent, officially plunging into bear market territory. The ripple effects were felt worldwide, with Germany’s DAX and France’s CAC 40 experiencing steep losses. Oil prices sank to their lowest levels since 2021, and copper prices also fell, reflecting growing concerns over the global economy. Additionally, Japan’s Nikkei slumped by 2.8 per cent. In India, the stock market suffered heavy losses, erasing approximately ₹9 trillion in value. The BSE Sensex closed at 75,364, dropping 930 points (1.22 per cent), while the National Stock Exchange (NSE) Nifty 50 fell by 345 points (1.49 per cent), ending at 22,904.
USTR (Office of the United States Trade Representative) cited research papers by several economists, many of whom publicly criticized the formula and stated the White House had misinterpreted and incorrectly applied their research. JPMorgan Chase & Co, other Banks and Economists have sounded the alarm, forecasting a US recession as a direct consequence of the new tariffs. Analysts predict that the increased cost of imports and retaliatory measures from key trading partners will stifle economic growth, disrupt supply chains, and erode consumer purchasing power.
Reacting to Tariffs announcement US Fed Chair Jerome Powell said that “tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent. We may find ourselves in the challenging scenario in which our dual-mandate goals to minimize inflation and maximize employment are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
In the aftermath, Trump administration said it will suspend most of these higher rates for 90 days, while maintaining the recently-imposed 10% levy on nearly all global imports. The pause was announced in post to Trump’s Truth Social. The move, which Trump framed as a response to outreach from over 75 nations seeking talks, was enough to flip investor sentiment overnight. The pause announcement led to a historic rally. The S&P 500 rose 9.52% for its biggest one-day gain since 2008. The Dow Jones rose 7.87%, for its biggest gain since March 2020, and the Nasdaq rose 12.16% for its largest one-day gain since January 2001 and its second-best day ever. Despite the US-China tension, the broader relief rally appears to have taken hold for the time being. Further development on this announcement and event to be tracked closely.
Global Market outlook including commodity
The global economy is facing a slowdown with lingering inflation and uncertain policy environments. There are geo political events and risks as well which has increase uncertainty and the impact has been volatility in Equity and bond prices with rally in Gold & Silver. Gold & Silver has remained the most preferred asset class recently with stellar rally and there is a possibility of consolidation around these peak valuations. However adding them and prudent rebalancing in the portfolio diversify risk and offer stability. Gold is currently trading at Rs 96k/ 10 gm and Silver at Rs 104k/ 1kg
Lessons & Investment strategies during Uncertain time
The Indian equity market recently experienced a significant correction, declining 17% from its all-time high before staging a recovery recently. Historically, such downturns have been followed by strong rebounds, with markets reverting to their mean and surging to new highs over the long term. A closer look at past trends reveals that each market recovery has been led by different sectors, highlighting the importance of sectoral rotation in driving overall market performance.
During periods of heightened volatility, the Banking, Pharma and FMCG sectors act as defensive anchors, absorbing market pressure and mitigating downside risks. The IT sector mostly outperforms during this period though there can be exceptions like this time. Cyclical sectors such as Auto, Realty, and Metals follow distinct performance patterns. The Realty sector tends to alternate between extreme outperformance and significant declines. Midcap and Smallcap indices tend to both underperform and outperform compared to large-cap In downtrend and uptrend respectively but in long run tend to deliver higher returns due to higher volatility.
Past data also indicates that the IPO index performs exceptionally well during bull markets, as investor sentiment fuels enthusiasm for newly listed companies. However, IPO stocks tend to be the first to decline when markets correct, making them more vulnerable to downturns. If the broader market rally continues, we may witness IPO stocks uptrend and rally though also dependent on the quality and fundamentals.
Investment strategies, discipline and psychology are the key to Market Success
While historical trends offer valuable insights, it is important to recognize that markets do not follow an exact script. As we enter into a new financial year, investors must remain agile, diversified across defensive, cyclical, and high-growth sectors, and prepared to capitalize on emerging opportunities while managing risks prudently. Understanding the nature of market and following guidelines will be useful
- Markets always revert to the mean in the long run. Up moves will be followed by down moves and vice versa.
- Markets are dynamic. There isn’t a constant. So, be prepared for change.
- Never put all your eggs in one basket. But don’t over-diversify either. Keep a balance between diversification and concentration based on your risk tolerance and financial goals
- Don’t be overjoyed when markets are good. Don’t be sad when markets are not going your way. Remember: This too shall pass.
- Markets have always been dynamic and volatile and will continue in future as well. We are witnessing rising uncertainty, changing market cycles, slower growth, geo political risks and interdependencies.
Market participants (especially retail investors) should be extra careful. They usually don’t have the advantage and expertise like large institutional investors. They should remain vigilant and follow these prudent guidelines.
1. Continue your SIPs – long-term SIPs should continue. When markets fall, your SIPs help you buy more units at a lower NAV, which can reward you in the long run.
2. Diversify – To reduce risk, it’s wise to diversify across asset classes – equity, gold, bonds, and real estate to minimize risk and bring stability to the portfolio
3. Hedge Your Positions – If knowledge and expertise available, buy options as insurance to hedge portfolio during uncertainty or high volatility.
4. Stay Flexible / Review your Portfolio Regularly – Don’t hold onto underperforming / weak fundamentals stocks out of emotion. Revisit the portfolio regularly for changes required if any
5. Don’t Average – Avoid averaging stocks just only because it has seen steep corrections, fundamentals and other factors are to be considered.
6. Rebalancing – partial profit booking and sector rotation or revising asset allocation during over valued markets or asset class and increasing investment during corrections phase / undervaluations.
7. Cash component – In uncertain times like these, caution is your best friend. Keep some cash component to take advantage of asset class, markets, sectors or stock corrections as opportunity often comes in between.
8. Professional expertise – Most retail Investors will not have the time and expertise to navigate the dynamic financial market and array of financial products. Hence it is advisable to consult a good financial advisor who can help you achieve your financial goals and work towards financial success
9. Psychology – This is an essential quality of great Investors. EQ beats IQ for successful investing. Follow systems & process, avoid distractions by noise on headlines, social media buzz, have patience and remember greed and fear are worst enemies in the markets.
The above are key practical methods investors can consider for successful Investing journey.
Outlook for the Indian Market
The key message is re-iterated again that there can be period of over valuation and undervaluation at times due to Investment behaviour of optimism, Euphoria and pessimism. The last financial year 2024-25 have amplified this remarkably. Equities as an asset class deliver good returns comparatively over long term. Indian market saw broad recovery from recent lows. Period of sharp corrections are followed by bigger rallies over longer term. The investment strategies and guidelines have been discussed in detail which can be followed in any market conditions. Indian economy is the fasted growing economy, hence in long run wealth can be created by Investing in Indian stock market. The returns over years may vary but most years have seen positive return. The outlook remains positive for this financial year as well despite many uncertainties. Many other macros, events and factors play role in the market with short to medium term impact. Stay alert and stick to the Investment principles. Further, consult your investment advisor for prudent financial practices.
Fundamental outlook: Indian market is appearing to consolidate around this level after sharp rally and to exercise caution in view of headwinds and geo political tensions. Corprate earnings declared so far have been mixed and many companies are yet to announce which will determine further directions.
Technical outlook: Indian market in last 2 months have closed in positive after steep corrections earlier. Nifty support seen currently at 23800 / 24000 and resistance around 24500 and 24750. Further details will be published in the next article.
