After enduring weeks of relentless selling that wiped out a significant chunk of investor wealth, Dalal Street finally witnessed a strong and much-needed recovery, marking its best trading week of 2025. The Nifty closed at 22,552.50, while the Sensex ended at 74,332.58, both registering a gain of nearly 2% for the week. This rebound has provided some relief to investors who had been grappling with sharp declines and heightened volatility. However, the crucial question remains: Has the market truly turned a corner, or is this just a temporary respite before another wave of selling?
A major factor contributing to the recent volatility has been the aggressive selling by foreign institutional investors (FIIs), who have been consistently offloading Indian equities throughout 2025. March has been no exception, with FIIs pulling out substantial funds from the market. However, there are now signs that the intensity of selling may be moderating. As of March 7, foreign investors had offloaded stocks worth a staggering ₹24,753 crore, bringing their total sell-off for the year to ₹1.37 lakh crore. While this level of outflow remains significant, the pace of selling appears to have slowed in the past few trading sessions, providing some hope that the worst of the FII-driven sell-off may be behind us.
One of the primary reasons for the exodus of foreign funds from Indian equities has been the remarkable rally in Chinese stock markets. The Hang Seng Index has delivered an impressive 23.48% year-to-date (YTD) return, a stark contrast to the Nifty, which remains down by 5% YTD. The Chinese government’s recent pro-business policies and aggressive economic stimulus measures have bolstered investor confidence, leading to heavy inflows into Chinese equities at the expense of other emerging markets, including India. However, according to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, this trend may not be sustainable in the long run. He pointed out that corporate earnings in China have remained weak since the 2008 financial crisis, and while short-term liquidity-driven rallies can attract traders, the long-term fundamentals remain uncertain.
On the domestic front, several factors have contributed to the improved market sentiment and the recent rally. One of the key drivers has been the Reserve Bank of India’s (RBI) decision to inject additional liquidity into the financial system, which has helped ease concerns over tight monetary conditions. Additionally, a decline in global crude oil prices and a weaker US dollar have provided further support to the markets by reducing import costs and improving India’s macroeconomic outlook.
Vinod Nair, Head of Research at Geojit Financial Services, noted that apart from these external factors, domestic economic indicators have also played a role in lifting investor confidence. A rebound in India’s Q3FY25 GDP growth, along with early signs of a recovery in consumer spending, has contributed to the positive sentiment. Sectors such as metals, capital goods, and energy were among the biggest gainers during the week, while financials, telecom, hotels, and aviation stocks also saw increased investor interest as traders shifted their focus toward domestic consumption-driven sectors.
However, global trade policies remain a significant wildcard that could impact market direction in the coming months. Former US President Donald Trump’s recent tariff threats have created considerable uncertainty in global markets, forcing investors to rethink their exposure to externally linked sectors. Vijayakumar noted that this trend is “as unpredictable as Trump’s policies,” making it difficult to determine how it will ultimately affect Indian markets. If new trade barriers are imposed, it could put pressure on Indian exporters while making domestic-focused sectors more attractive in comparison.
From a technical perspective, the Nifty faces resistance near the 22,700 level, which aligns with its 20-day Exponential Moving Average (DEMA). If the index manages to break above this crucial resistance level, it could open the door for further gains toward the 23,200-23,400 range. On the other hand, if the Nifty fails to hold its current levels and slips below 22,250, it may test the 21,800-22,000 support zone. Meanwhile, the Bank Nifty index needs to decisively move above the 49,000 level to target the psychologically important 50,000 mark.
Looking ahead, investors will continue to monitor global and domestic macroeconomic indicators to gauge the market’s future direction. Key events on the horizon include developments related to US tariff policies, upcoming inflation data, and geopolitical risks, all of which have the potential to influence market sentiment. On the domestic front, investors will closely watch the upcoming releases of India’s Index of Industrial Production (IIP) and Consumer Price Index (CPI) inflation data, which could provide further insights into the state of the economy and the potential trajectory of monetary policy.
While the recent market bounce has provided a temporary reprieve, analysts caution that a sustained uptrend will depend on corporate earnings recovery and greater clarity on global trade policies. Moreover, broader market indices remain expensive, which could limit further upside potential in the near term. However, large-cap stocks appear to be better positioned at current valuations, making them a relatively safer bet for investors navigating the ongoing uncertainty.
For now, market participants can take some comfort in the recent recovery, but the road ahead remains uncertain. Volatility is likely to persist, and investors will need to stay vigilant, keeping a close eye on both domestic and international developments that could shape the market’s trajectory in the coming months.
