February 2025 Market Efficiency Recap:
In February 2025, the Indian fairness market confronted a pointy correction after a powerful 2024, with broader indices witnessing a steeper decline than massive caps. The Nifty hit a current low of twenty-two,125 on twenty eighth Feb, marking a 16% drop from its peak. Midcap and Smallcap indices corrected by 21% and 25%, respectively, whereas the Nifty Subsequent-50, Midcap 100, Smallcap, and Microcap indices declined by -9.51%, -10.71%, -13.00%, and -14.27%, respectively. The correction was pushed by US commerce coverage uncertainty, rising US bond yields and greenback index, slowing home earnings progress, persistent FII promoting, and a scarcity of constructive home triggers. The sharp downturn left the market in an oversold zone, with solely 8% of NSE 500 shares buying and selling above their 200-day shifting common.
Overseas institutional buyers (FIIs) continued to liquidate their holdings, offloading ₹78,027 crore in January and ₹34,574 crore in February. The auto, healthcare, and FMCG sectors noticed the best outflows. This persistent promoting pushed FIIs’ property below custody (AUC) to a 13-month low of ₹62.38 lakh crore in February, down from a peak of ₹77.96 lakh crore in September 2024. Regardless of this, FII possession in Indian equities rose to a five-month excessive of 16.24%.
Sectoral efficiency
In February 2025, most sectors witnessed sharp declines, with a number of exceptions offering some resilience. Banks have been the best-performing sector, falling solely -2.51%, with non-public banks limiting losses to simply -0.66%. REITs and Providers indices additionally fared comparatively higher, declining by -1.5% and -4.22%, respectively.
Then again, a number of sectors noticed steep corrections. Realty (-13.40%), IT (-12.53%), and Media (-12.11%) have been among the many worst hit, adopted by Auto (-10.35%) and FMCG (-10.08%). Thematic indices additionally struggled, with Indian Railway PSUs plunging -21.97%, India Defence dropping -19.57%, and SME Emerge falling -15.74%. The IPO Index continued to lag, reflecting weak investor sentiment in newly listed shares.
Within the following sections, we offer a extra complete examination and detailed insights of some main sectors:
Auto:
The Indian auto sector skilled a combined efficiency in February 2025, with year-on-year (YoY) progress in most segments regardless of a sequential decline. Whole passenger car (PV) gross sales stood at 3,90,604 models, reflecting a marginal 0.32% YoY progress however a 2.68% month-on-month (MoM) decline. The shift in shopper choice in the direction of SUVs supported general progress, although worth hikes in January and February dampened demand.
The 2-wheeler (2W) section remained steady, with premium bikes and scooters driving gross sales. Total, home 2W gross sales noticed a slight YoY enhance, with key gamers reporting progress of three% to 19%, whereas others confronted declines of 12% to twenty%. Electrical car (EV) registrations moderated after a powerful January, with the two-wheeler EV section sustaining a market share of over 28%.
The industrial car (CV) section declined by 3% YoY and 1% MoM, impacted by a excessive base impact and average alternative demand. Nevertheless, infrastructure-driven progress is anticipated to help medium to heavy industrial autos (MHCVs) within the coming months. The three-wheeler (3W) section posted a 5% YoY and a pair of% quarter-on-quarter (QoQ) progress, pushed by rising demand from the e-commerce sector.
The tractor trade confirmed the strongest efficiency, with home gross sales rising 12% YoY, supported by a 27% YoY enhance in general trade dispatches. Favorable monsoon situations and improved water ranges boosted Rabi sowing, resulting in larger rural demand.
Wanting forward, the auto sector is anticipated to endure consolidation within the quick time period. Nevertheless, rural restoration, new mannequin launches, and authorities measures to spice up consumption, together with potential tax reduction for the center class, might present upside triggers for progress throughout segments.
Metals:
The metallic sector remained below stress in February 2025, with combined tendencies throughout ferrous and non-ferrous metals. Home hot-rolled coil (HRC) costs remained flat at ₹48,300 per tonne, reflecting restricted demand as consumers opted for need-based purchases. In distinction, billet costs in Raipur noticed a 1.9% week-on-week (WoW) enhance to ₹40,100 per tonne, pushed by improved shopping for exercise within the semi-finished metal section. Chinese language HRC costs additionally elevated 1.1% WoW to ₹41,506 per tonne, regardless of a declining pattern in futures. Iron ore costs in Odisha remained regular at ₹7,000 per tonne, as a number of miners approached their environmental clearance extraction limits. In the meantime, coking coal costs declined 0.7% WoW to $142 per tonne, reflecting weaker demand expectations amid potential metal manufacturing cuts in China.
The non-ferrous metallic section skilled broad-based declines because of world financial issues and commerce conflict fears. Aluminium costs fell 2.7% WoW to $2,621 per tonne, amid issues over new US tariffs affecting world commerce. Copper costs dropped 1.9% WoW to $9,338 per tonne, reflecting market worries over potential US import restrictions. Zinc costs declined 4.5% WoW to $2,763 per tonne, pushed by a stronger US greenback and commerce uncertainty. Different base metals, together with nickel (-0.3%), lead (-0.4%), and tin (-7.3%), additionally noticed declines.
Going ahead, the metallic sector is anticipated to stay unstable, with world commerce insurance policies, demand from key sectors, and supply-side constraints taking part in an important function. Whereas infrastructure growth and home consumption might supply some help, issues over a worldwide financial slowdown and geopolitical commerce tensions could preserve worth actions unsure within the close to time period.
Hospitality:
The hospitality sector continued its sturdy progress trajectory in February 2025, pushed by seasonal demand from weddings and main cultural occasions such because the Kumbh Mela in Prayagraj, Ayodhya, and Varanasi. Common Day by day Charges (ADR) noticed a YoY enhance of 18% within the cheaper price band and 12.6% within the higher worth band, reflecting sturdy demand. On a month-on-month (MoM) foundation, ADR rose by 25% and 5%, respectively. Cities like Bengaluru and Hyderabad, which had underperformed in earlier quarters, noticed a big rebound in ADRs as company and leisure journey improved.
New resort stock enlargement remained sturdy, with organized gamers persevering with so as to add resorts primarily via administration contracts and license agreements moderately than owned property, guaranteeing stability sheet flexibility. With sustained demand and elevated concentrate on enlargement, the sector is anticipated to keep up its progress momentum.
The Union Finances 2025 offered additional tailwinds for the trade, as the federal government introduced initiatives to develop 50 key tourism websites, increase regional connectivity below the UDAN scheme, and introduce performance-linked incentives for states to reinforce tourism infrastructure. MUDRA loans for homestays, funding in medical tourism, and help for Buddhist tourism circuits are anticipated to additional enhance demand. Moreover, ability growth applications in hospitality administration will assist strengthen the workforce and enhance service high quality.
Going ahead, overseas journey is anticipated to choose up, supporting continued progress. With sturdy demand, rising ADRs, and government-backed initiatives, the sector stays well-positioned for long-term enlargement.
Banking:
India’s banking sector stays on a steady trajectory, supported by sturdy financial fundamentals and structural enhancements. As of February 2025, non-food credit score progress stood at 11.3%, barely under January’s 11.4% however an enchancment from 11.1% in December 2024.
Sector-wise credit score enlargement has been led by the companies and trade segments, with companies credit score rising to 12.5% YoY in January 2025 from 11.7% in December 2024. Loans to NBFCs confirmed an uptick, rising at 7.7% YoY, in comparison with 6.7% in December 2024. Credit score circulation to the commercial sector improved to eight% YoY from 7.2% in December 2024, whereas retail credit score expanded by 11.8% YoY. Agriculture loans maintained regular progress at 12.2% YoY.
On the liabilities aspect, deposit progress improved to 10.6% as of seventh February 2025, up from 10.3% in January 2024. Nevertheless, the credit-to-deposit ratio could stay below stress, provided that credit score enlargement is barely outpacing deposit accumulation.
The Weighted Common Home Time period Deposit Charge (WADTDR) rose by 2 foundation factors to 7.02% in January 2025, reflecting a marginal enhance in deposit prices. In the meantime, lending charges edged up, with the Weighted Common Lending Charge (WALR) on recent rupee loans rising by 7 bps to 9.32%.
The banking sector’s asset high quality is anticipated to stay steady, with non-performing property projected to say no to round 3.0% of gross loans by March 2025. This enchancment is attributed to more healthy company stability sheets and enhanced danger administration practices. Whereas retail mortgage underwriting requirements stay sturdy, the fast enlargement of unsecured private loans introduces some danger elements.
Credit score prices, which fell to a decade-low of 0.8% in FY24, are more likely to normalize inside a 0.8%-0.9% vary in FY25. Regardless of this, profitability ranges ought to stay wholesome, with return on common property (RoA) anticipated to be round 1.2% in FY25.
The Reserve Financial institution of India (RBI) has intensified its regulatory oversight, significantly in areas of compliance and governance, which can enhance compliance-related bills for banks. Nevertheless, these measures are anticipated to reinforce general monetary stability. Moreover, the banking sector stays well-capitalized, guaranteeing sufficient danger absorption capability, whereas NBFCs and City Cooperative Banks proceed to indicate resilience. Credit score progress in FY25 is projected to be within the vary of 11-13%, although a slowdown in unsecured lending, akin to private loans and bank cards, could average progress. Nevertheless, the housing finance section is poised for enlargement, pushed by the RBI’s 25 bps repo price reduce and government-backed inexpensive housing initiatives.
Going ahead, FY26 is anticipated to witness additional enhancements in credit score demand, supported by budgetary measures, financial enlargement, and the restoration of pre-existing danger weight norms for MFIs and NBFCs. The sector’s long-term outlook stays constructive, underpinned by sturdy financial exercise, improved asset high quality, and regulatory help.
Necessary occasions & updates
A number of necessary occasions of the final month and upcoming ones are as under:
- India’s GDP grew 6.2% year-on-year in Q3 FY25, up from 5.6% within the earlier quarter however barely under the 6.3% forecast. Progress moderated because of excessive power prices, tight liquidity, and RBI’s restrictive coverage.
- India’s GDP is projected to develop 6.5% in FY25, the slowest tempo for the reason that pandemic-induced recession in FY22, although barely larger than the preliminary 6.4% estimate.
- India’s manufacturing PMI fell to 56.3 in February 2025, the slowest since December 2023 however nonetheless sturdy, pushed by sturdy demand and near-record job creation.
- India’s deposit progress rose to 10.6% as of Feb 2025, up from 10.3% in January.
- The HSBC India Providers PMI was revised to 59.0 in February 2025, above January’s 26-month low of 56.5 and market expectations of 57.3, indicating continued progress for the forty third straight month.
- The HSBC India Composite PMI stood at 58.8 in February 2025, down from the flash estimate of 60.6 however above January’s 57.7, marking 43 months of enlargement. Providers progress picked up, whereas manufacturing hit a 14-month low.
- India’s infrastructure output grew 4.6% YoY in January 2025, down from 4.8% in December. Progress slowed for coal, metal, and electrical energy, whereas crude oil and pure gasoline declined. Nevertheless, refinery merchandise, fertilizers, and cement noticed stronger progress.
Basic outlook:
India continues to cement its place as one of many world’s fastest-growing economies, with GDP anticipated to increase by 6.5% in FY25. This progress is underpinned by sustained shopper spending, aggressive infrastructure enlargement, and a government-led capex push. Structural shifts, together with RBI’s anticipated price cuts, ample liquidity measures, and a budgetary enhance to consumption, point out that FY26 might witness even stronger momentum. Nevertheless, near-term dangers akin to world commerce disruptions and stretched fairness valuations might pose challenges.
Company earnings stay resilient, with practically 70% of NIFTY 50 corporations assembly or exceeding Q3FY25 expectations. Nevertheless, sectoral disparities persist—whereas consumption-driven companies proceed to thrive, cyclical sectors, significantly commodities and industrials, have weighed on general earnings progress, which is projected at 5.3% for FY25 (8.5% excluding Oil & Fuel). The outlook for FY26 seems extra promising, supported by base results, elevated authorities spending, and a broader consumption revival.
Funding dynamics are evolving, with non-public corporates shifting focus in the direction of mental property, innovation, and digital property as an alternative of typical capital expenditures. In the meantime, rising family financial savings and a surge in retail fairness participation proceed to fortify market liquidity. SEBI’s tighter rules on F&O buying and selling have curtailed speculative excesses, fostering a extra balanced market atmosphere.
India’s bond market has remained comparatively steady, with 10-year yields fluctuating between 6.47% and seven.13%, reflecting RBI’s prudent liquidity administration. As inflation moderates and price cuts develop into extra possible in 2025, borrowing prices are more likely to ease, additional bolstering financial enlargement.
Technical outlook.
Indian fairness markets have witnessed heightened volatility in 2025, reflecting a tug-of-war between bullish optimism and macroeconomic uncertainties. Whereas high-frequency indicators sign regular progress, there are indicators of moderation—the HSBC Manufacturing PMI eased to 56.3, and the Composite PMI settled at 58.8, each nonetheless indicating enlargement however at a slower tempo. In the meantime, the Providers PMI rebounded to 59.0, underscoring resilient home demand. Auto gross sales have held agency, and sturdy GST collections proceed to strengthen financial momentum.
Regardless of these positives, investor sentiment stays cautious, with Nifty struggling to interrupt key resistance at 23,000, dealing with an excellent stronger barrier close to 23,500. On the draw back, instant help is positioned at 21,900, with an important security internet at 21,500. Liquidity situations have improved, however exterior headwinds, together with world financial shifts and the upcoming company earnings season, will closely affect market path.
Given the present panorama, the market is more likely to stay range-bound within the close to time period, with a slight upward tilt contingent on world cues and home earnings power. Any decisive breakout above resistance ranges might set off recent upside momentum, whereas a breach of key help zones could invite deeper corrections.
Outlook for the World Market
US Market:
As of February 28, 2025, the US inventory market was buying and selling at a slight 1% low cost to truthful worth, marking the primary time in a 12 months that equities haven’t been overvalued. Nevertheless, this shift comes after an prolonged interval of elevated valuations, the place the market had been on the higher finish of its truthful worth vary. Traditionally, such premium ranges have been uncommon, occurring lower than 10% of the time since 2010. Given this backdrop, a cautious method stays prudent, because the market’s upside seems restricted whereas dangers stay prevalent.
A notable pattern this 12 months has been the divergence between worth and progress shares. Yr-to-date via March 3, 2025, the Morningstar US Worth Index has gained 5.54%, whereas the Morningstar US Progress Index has declined 3.81%. Progress shares have been buying and selling at their highest premium for the reason that speculative tech rally of early 2021, making them significantly susceptible as financial situations soften. Then again, worth shares stay attractively priced, and the continuing rotation into value-oriented investments nonetheless has additional room to run.
Financial information for early 2025 has been weak, with a number of indicators pointing to a slowdown. Retail gross sales, auto gross sales, housing, and manufacturing all noticed declines in January, impacted by extreme winter storms, LA wildfires, and a foul flu season. Moreover, federal spending cuts have began to weigh on employment, pushing up jobless claims as authorities headcount reductions and suspended funds to federal applications take impact. This might result in a cumulative hit of 250,000 to 500,000 jobs within the coming months. Client sentiment has additionally deteriorated, significantly amongst Democrat-leaning shoppers, whose confidence ranges are actually at their lowest since 2008.
Whereas inflation had been moderating getting into 2025, new pressures have emerged. Tariff will increase introduced in February and March are projected to have a big influence, equating to a tax hike of 0.5% to 1.0% of GDP, which might translate into larger shopper costs in 2025 and 2026. Moreover, rising prices for gasoline, diesel, pure gasoline, and meals—significantly as a result of avian flu affecting poultry—pose additional dangers to cost stability. Regardless of market expectations of aggressive price cuts, the Federal Reserve has maintained a cautious stance, maintaining charges regular in January and signaling that it’s in no rush to ease coverage. With inflation anticipated to stay above the Fed’s 2% goal, the central financial institution is forecasted to chop charges by solely 0.25% by year-end. Moreover, the Fed is ready to finish its stability sheet discount program (QT) in July, which might present some liquidity reduction however is unlikely to alter the broader outlook.
Given these dynamics, warning is warranted. With valuations nonetheless on the costly aspect and financial headwinds persisting, buyers ought to prioritize high quality shares and lean in the direction of value-oriented investments whereas sustaining a defensive positioning within the close to time period.
Outlook for Gold
Gold costs have been fluctuating lately, pushed by commerce tensions following former US President Donald Trump’s tariff insurance policies. The main target is now on the upcoming US employment information, which can present readability on the Federal Reserve’s rate of interest outlook. In the meantime, the US Greenback Index has declined by 1.39% to a three-month low, supporting an upward bias in gold costs.
On sixth March 2025, gold costs in India noticed a broad decline. The value of 22-carat gold fell by ₹450 per 10 grams to ₹80,200, whereas 24-carat gold dropped by ₹490 to ₹87,490 per 10 grams. Equally, 18-carat gold declined by ₹370, bringing its worth to ₹65,620 per 10 grams. For bigger portions, 100 grams of 24-carat gold is now priced at ₹8,74,900 after a ₹4,900 drop, whereas 22-carat gold stands at ₹8,02,000 following a ₹4,500 discount. Likewise, 18-carat gold dipped by ₹3,700 to ₹6,56,200 per 100 grams.
Gold is anticipated to keep up its upward momentum, with the potential to check the $2,935 degree because the greenback weakens and safe-haven demand rises. Latest US financial information indicators a slowdown, and a commerce conflict with key companions might additional weigh on progress, rising the chance of Federal Reserve price cuts. Market expectations have now priced in price reductions this 12 months, exceeding earlier projections. Moreover, key financial information releases and the European Central Financial institution’s financial coverage stance stay essential elements, with potential price cuts on the horizon. Within the close to time period, spot gold is more likely to discover help round $2,890 and will transfer larger in the direction of $2,935.
What ought to Traders do?
With most key occasions now behind us, the market focus shifts to world developments, together with US coverage adjustments, reciprocal tax updates, potential Fed price cuts, and actions in forex and oil costs. Domestically, consideration stays on India’s rate of interest trajectory, with one other RBI price reduce anticipated this 12 months.
We count on some additional draw back this month, primarily pushed by loss harvesting and the potential unwinding of futures positions. The current correction has already erased earlier positive aspects, bringing market returns to a flat degree on a one-year foundation. Given this backdrop, near-term consolidation is probably going, with market breadth anticipated to stay slim. Nifty is at the moment buying and selling at 18.1x on a 12-month ahead earnings foundation, barely under its five-year common however consistent with its 10-year pattern, making massive caps comparatively extra enticing in comparison with the broader market.
With no sturdy constructive triggers within the instant time period, the market could proceed to see a while correction. Massive-cap high quality shares, monopolies, and market leaders are anticipated to carry up higher, whereas high-beta and momentum shares must be prevented for now. Moreover, earnings progress dangers persist in Capex-driven and export-oriented sectors. Regardless of near-term challenges, our long-term outlook stays constructive, supported by elevated authorities spending and bettering credit score progress. Nevertheless, for this month, warning is warranted, and a selective method specializing in ‘Progress at a Affordable Worth’ and ‘High quality’ stays the perfect technique to navigate ongoing volatility
Disclaimer:
This text shouldn’t be construed as funding recommendation, please seek the advice of your Funding Adviser earlier than making any sound funding resolution.
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