India’s stocks have erased most of this year’s losses, thanks to early signs of increased government spending and monetary easing. Global banks, including Citigroup Inc., indicate that last year’s concerns about selloff are easing, reducing worries about the market’s high valuations.
Additionally, the central bank’s liquidity infusion and recent rate cut have fueled optimism among investors, as quoted on Economic Times. Note that India’s central bank cut interest rates in February for the first time in nearly five years to counter slowing growth in its economy. The Reserve Bank of India (RBI) reduced its repo rate from 6.5% to 6.25%, in line with the expectations of many economists.
Experts See Signs of Recovery
“There is a convincing recovery in various stocks, and this rally definitely seems to have legs,” said Sonam Srivastava, founder of Wright Research in Mumbai. She also noted expectations of earnings bottoming out, further strengthening market sentiment.
Nifty Rebounds From March Lows
The Nifty has surged 7% from its March lows after previously falling 16% from its September high. The earlier downturn was caused by economic slowdown and persistent foreign selling, but signs of recovery are now emerging.
Investors have been on a bargain-hunting spree, and the sentiment was further strengthened by hopes of foreign investors turning net buyers. On March 21, 2025, foreign portfolio investors (FPI) purchased Indian shares worth 74.70 billion rupees ($868.3 million), the biggest single-day inflow in four months, as quoted on Reuters.
The recent FPI buying was accompanied by short-covering, said Devarsh Vakil, head of prime research at HDFC Securities, the Reuters article noted. Short-covering is a process of buying back the borrowed shares or contracts to close the existing bearish position. All these activities point to a rebound in India-based stocks and exchange-traded funds (ETFs).
Any Wall of Worry?
Although India’s benchmark indices logged their strongest weekly performance in over four years last week, the country’s stock market volatility gauge surged by nearly 11% on March 24, 2025, probably due to Trump’s tariff concerns. This indicates that the rally is not worry-free.
Post the surge in the broader markets last week, India VIX had corrected to a multi-month low of 11-12, according to Ruchit Jain, head of equity technical research and wealth management at Motilal Oswal Financial Services, as quoted on Business Standard.
Overall, we do not expect the Indian equities to struggle for long. Improving macros of the Indian economy and fair valuations have led FIIs to become net buyers from sleers, according to V K Vijayakumar, Chief Investment Strategist, Geojit Investment Services, quoted on Business Standard.
India ETFs in Focus
Against this backdrop, investors can bet on India-based ETFs like iShares MSCI India ETF (INDA – Free Report) , WisdomTree India Earnings Fund (EPI – Free Report) , Franklin FTSE India ETF (FLIN – Free Report) , iShares India 50 ETF (INDY – Free Report) , Invesco India ETF (PIN – Free Report) and First Trust India NIFTY 50 Equal Weight ETF (NFTY – Free Report) .
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