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 latest 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 development, persistent FII promoting, and an absence of optimistic 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 transferring common.
International 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 very best outflows. This persistent promoting pushed FIIs’ property beneath 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 just a few exceptions offering some resilience. Banks have been the best-performing sector, falling solely -2.51%, with non-public banks limiting losses to only -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) development in most segments regardless of a sequential decline. Complete passenger automobile (PV) gross sales stood at 3,90,604 items, reflecting a marginal 0.32% YoY development however a 2.68% month-on-month (MoM) decline. The shift in client desire in direction of SUVs supported general development, although value hikes in January and February dampened demand.
The 2-wheeler (2W) section remained secure, with premium bikes and scooters driving gross sales. Total, home 2W gross sales noticed a slight YoY enhance, with key gamers reporting development of three% to 19%, whereas others confronted declines of 12% to twenty%. Electrical automobile (EV) registrations moderated after a powerful January, with the two-wheeler EV section sustaining a market share of over 28%.
The industrial automobile (CV) section declined by 3% YoY and 1% MoM, impacted by a excessive base impact and average alternative demand. Nonetheless, infrastructure-driven development 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) development, pushed by rising demand from the e-commerce sector.
The tractor business confirmed the strongest efficiency, with home gross sales rising 12% YoY, supported by a 27% YoY enhance in general business dispatches. Favorable monsoon circumstances and improved water ranges boosted Rabi sowing, resulting in greater rural demand.
Trying forward, the auto sector is anticipated to endure consolidation within the quick time period. Nonetheless, 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 development throughout segments.
Metals:
The metallic sector remained beneath strain 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 patrons 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 considerations and commerce warfare fears. Aluminium costs fell 2.7% WoW to $2,621 per tonne, amid considerations 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 a vital position. Whereas infrastructure improvement and home consumption might provide some help, considerations over a world financial slowdown and geopolitical commerce tensions might preserve value actions unsure within the close to time period.
Hospitality:
The hospitality sector continued its sturdy development 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 Each day Charges (ADR) noticed a YoY enhance of 18% within the lower cost band and 12.6% within the higher value 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 lodge stock growth remained sturdy, with organized gamers persevering with so as to add lodges primarily via administration contracts and license agreements reasonably than owned property, guaranteeing steadiness sheet flexibility. With sustained demand and elevated give attention to growth, the sector is anticipated to keep up its development momentum.
The Union Funds 2025 supplied additional tailwinds for the business, as the federal government introduced initiatives to develop 50 key tourism websites, broaden regional connectivity beneath the UDAN scheme, and introduce performance-linked incentives for states to boost tourism infrastructure. MUDRA loans for homestays, funding in medical tourism, and help for Buddhist tourism circuits are anticipated to additional enhance demand. Moreover, talent improvement packages in hospitality administration will assist strengthen the workforce and enhance service high quality.
Going ahead, overseas journey is anticipated to select up, supporting continued development. With sturdy demand, rising ADRs, and government-backed initiatives, the sector stays well-positioned for long-term growth.
Banking:
India’s banking sector stays on a secure trajectory, supported by sturdy financial fundamentals and structural enhancements. As of February 2025, non-food credit score development stood at 11.3%, barely beneath January’s 11.4% however an enchancment from 11.1% in December 2024.
Sector-wise credit score growth has been led by the providers and business segments, with providers 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 circulate 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 development at 12.2% YoY.
On the liabilities facet, deposit development improved to 10.6% as of seventh February 2025, up from 10.3% in January 2024. Nonetheless, the credit-to-deposit ratio might stay beneath strain, provided that credit score growth is barely outpacing deposit accumulation.
The Weighted Common Home Time period Deposit Fee (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 Fee (WALR) on recent rupee loans rising by 7 bps to 9.32%.
The banking sector’s asset high quality is anticipated to stay secure, 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 steadiness sheets and enhanced threat administration practices. Whereas retail mortgage underwriting requirements stay sturdy, the fast growth of unsecured private loans introduces some threat 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, notably in areas of compliance and governance, which can enhance compliance-related bills for banks. Nonetheless, these measures are anticipated to boost general monetary stability. Moreover, the banking sector stays well-capitalized, guaranteeing sufficient threat absorption capability, whereas NBFCs and City Cooperative Banks proceed to indicate resilience. Credit score development 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, might average development. Nonetheless, the housing finance section is poised for growth, pushed by the RBI’s 25 bps repo fee 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 growth, and the restoration of pre-existing threat weight norms for MFIs and NBFCs. The sector’s long-term outlook stays optimistic, underpinned by sturdy financial exercise, improved asset high quality, and regulatory help.
Vital occasions & updates
A couple of necessary occasions of the final month and upcoming ones are as beneath:
- India’s GDP grew 6.2% year-on-year in Q3 FY25, up from 5.6% within the earlier quarter however barely beneath the 6.3% forecast. Development moderated because of excessive vitality prices, tight liquidity, and RBI’s restrictive coverage.
- India’s GDP is projected to develop 6.5% in FY25, the slowest tempo because the pandemic-induced recession in FY22, although barely greater 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 development 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 development 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 growth. Providers development 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. Development slowed for coal, metal, and electrical energy, whereas crude oil and pure fuel declined. Nonetheless, refinery merchandise, fertilizers, and cement noticed stronger development.
Elementary outlook:
India continues to cement its place as one of many world’s fastest-growing economies, with GDP anticipated to broaden by 6.5% in FY25. This development is underpinned by sustained client spending, aggressive infrastructure growth, and a government-led capex push. Structural shifts, together with RBI’s anticipated fee cuts, ample liquidity measures, and a budgetary enhance to consumption, point out that FY26 might witness even stronger momentum. Nonetheless, near-term dangers akin to world commerce disruptions and stretched fairness valuations might pose challenges.
Company earnings stay resilient, with almost 70% of NIFTY 50 corporations assembly or exceeding Q3FY25 expectations. Nonetheless, sectoral disparities persist—whereas consumption-driven companies proceed to thrive, cyclical sectors, notably commodities and industrials, have weighed on general earnings development, 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 direction of mental property, innovation, and digital property as a substitute 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 laws on F&O buying and selling have curtailed speculative excesses, fostering a extra balanced market atmosphere.
India’s bond market has remained comparatively secure, with 10-year yields fluctuating between 6.47% and seven.13%, reflecting RBI’s prudent liquidity administration. As inflation moderates and fee cuts grow to be extra possible in 2025, borrowing prices are more likely to ease, additional bolstering financial growth.
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 development, there are indicators of moderation—the HSBC Manufacturing PMI eased to 56.3, and the Composite PMI settled at 58.8, each nonetheless indicating growth 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 bolster 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, quick help is positioned at 21,900, with a vital security internet at 21,500. Liquidity circumstances 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 energy. Any decisive breakout above resistance ranges might set off recent upside momentum, whereas a breach of key help zones might invite deeper corrections.
Outlook for the International 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 yr that equities haven’t been overvalued. Nonetheless, 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 strategy stays prudent, because the market’s upside seems restricted whereas dangers stay prevalent.
A notable pattern this yr has been the divergence between worth and development shares. 12 months-to-date via March 3, 2025, the Morningstar US Worth Index has gained 5.54%, whereas the Morningstar US Development Index has declined 3.81%. Development shares have been buying and selling at their highest premium because the speculative tech rally of early 2021, making them notably weak as financial circumstances soften. Then again, worth shares stay attractively priced, and the continuing rotation into value-oriented investments nonetheless has additional room to run.
Financial knowledge 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 packages take impact. This might result in a cumulative hit of 250,000 to 500,000 jobs within the coming months. Shopper sentiment has additionally deteriorated, notably amongst Democrat-leaning customers, whose confidence ranges at the moment are at their lowest since 2008.
Whereas inflation had been moderating coming 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 greater client costs in 2025 and 2026. Moreover, rising prices for gasoline, diesel, pure fuel, and meals—notably because of the avian flu affecting poultry—pose additional dangers to cost stability. Regardless of market expectations of aggressive fee cuts, the Federal Reserve has maintained a cautious stance, holding 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 about to finish its steadiness sheet discount program (QT) in July, which might present some liquidity reduction however is unlikely to vary the broader outlook.
Given these dynamics, warning is warranted. With valuations nonetheless on the costly facet and financial headwinds persisting, buyers ought to prioritize high quality shares and lean in direction of value-oriented investments whereas sustaining a defensive positioning within the close to time period.
Outlook for Gold
Gold costs have been fluctuating just 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 knowledge, 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 value 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 knowledge indicators a slowdown, and a commerce warfare with key companions might additional weigh on development, rising the probability of Federal Reserve fee cuts. Market expectations have now priced in fee reductions this yr, exceeding earlier projections. Moreover, key financial knowledge releases and the European Central Financial institution’s financial coverage stance stay essential elements, with potential fee cuts on the horizon. Within the close to time period, spot gold is more likely to discover help round $2,890 and will transfer greater in direction of $2,935.
What ought to Buyers 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 fee cuts, and actions in foreign money and oil costs. Domestically, consideration stays on India’s rate of interest trajectory, with one other RBI fee reduce anticipated this yr.
We anticipate some additional draw back this month, primarily pushed by loss harvesting and the potential unwinding of futures positions. The latest correction has already erased earlier positive factors, 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 present buying and selling at 18.1x on a 12-month ahead earnings foundation, barely beneath its five-year common however in keeping with its 10-year pattern, making massive caps comparatively extra engaging in comparison with the broader market.
With no sturdy optimistic triggers within the quick time period, the market might proceed to see a while correction. Giant-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 development 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 development. Nonetheless, for this month, warning is warranted, and a selective strategy specializing in ‘Development at a Affordable Value’ and ‘High quality’ stays the very best 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.
Should you wouldn’t have one go to mymoneysage.in