February 2025 Market Efficiency Recap:
In February 2025, the Indian fairness market confronted a pointy correction after a robust 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 progress, persistent FII promoting, and an absence 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 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 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 had been the best-performing sector, falling solely -2.51%, with personal banks limiting losses to only -0.66%. REITs and Companies 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%) had 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 blended efficiency in February 2025, with year-on-year (YoY) progress in most segments regardless of a sequential decline. Whole passenger automobile (PV) gross sales stood at 3,90,604 items, reflecting a marginal 0.32% YoY progress however a 2.68% month-on-month (MoM) decline. The shift in client choice in direction of SUVs supported total progress, although value hikes in January and February dampened demand.
The 2-wheeler (2W) phase remained steady, with premium bikes and scooters driving gross sales. General, 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 automobile (EV) registrations moderated after a robust January, with the two-wheeler EV phase sustaining a market share of over 28%.
The business automobile (CV) phase declined by 3% YoY and 1% MoM, impacted by a excessive base impact and reasonable substitute demand. Nonetheless, infrastructure-driven progress is predicted to help medium to heavy business automobiles (MHCVs) within the coming months. The three-wheeler (3W) phase posted a 5% YoY and a couple of% quarter-on-quarter (QoQ) progress, 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 total business dispatches. Favorable monsoon circumstances and improved water ranges boosted Rabi sowing, resulting in greater rural demand.
Wanting forward, the auto sector is predicted to bear consolidation within the brief time period. Nonetheless, rural restoration, new mannequin launches, and authorities measures to spice up consumption, together with potential tax reduction for the center class, may present upside triggers for progress throughout segments.
Metals:
The metallic sector remained below strain in February 2025, with blended developments 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 phase. 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 phase skilled broad-based declines because of international financial issues and commerce warfare fears. Aluminium costs fell 2.7% WoW to $2,621 per tonne, amid issues over new US tariffs affecting international 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 predicted to stay unstable, with international commerce insurance policies, demand from key sectors, and supply-side constraints taking part in an important function. Whereas infrastructure growth and home consumption may supply some help, issues 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 robust 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 lower cost band and 12.6% within the higher value band, reflecting robust 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 strong, with organized gamers persevering with so as to add motels primarily by administration contracts and license agreements relatively than owned property, guaranteeing steadiness sheet flexibility. With sustained demand and elevated concentrate on growth, the sector is predicted to take care of its progress momentum.
The Union Funds 2025 offered additional tailwinds for the business, as the federal government introduced initiatives to develop 50 key tourism websites, develop regional connectivity below 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, ability growth packages in hospitality administration will assist strengthen the workforce and enhance service high quality.
Going ahead, overseas journey is predicted to choose up, supporting continued progress. With robust demand, rising ADRs, and government-backed initiatives, the sector stays well-positioned for long-term growth.
Banking:
India’s banking sector stays on a steady trajectory, supported by robust 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 growth has been led by the companies and business 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 stream 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. Nonetheless, the credit-to-deposit ratio might stay below 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 contemporary rupee loans growing by 7 bps to 9.32%.
The banking sector’s asset high quality is predicted 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 steadiness sheets and enhanced danger administration practices. Whereas retail mortgage underwriting requirements stay robust, the speedy growth of unsecured private loans introduces some danger components.
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 total monetary stability. Moreover, the banking sector stays well-capitalized, guaranteeing ample danger absorption capability, whereas NBFCs and City Cooperative Banks proceed to point out resilience. Credit score progress in FY25 is projected to be within the vary of 11-13%, although a slowdown in unsecured lending, corresponding to private loans and bank cards, might reasonable progress. Nonetheless, the housing finance phase is poised for growth, pushed by the RBI’s 25 bps repo charge reduce and government-backed inexpensive housing initiatives.
Going ahead, FY26 is predicted to witness additional enhancements in credit score demand, supported by budgetary measures, financial growth, and the restoration of pre-existing danger weight norms for MFIs and NBFCs. The sector’s long-term outlook stays constructive, underpinned by strong financial exercise, improved asset high quality, and regulatory help.
Necessary occasions & updates
Just a few vital 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 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 robust, pushed by strong 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 Companies 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 growth. Companies 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. Nonetheless, refinery merchandise, fertilizers, and cement noticed stronger progress.
Elementary outlook:
India continues to cement its place as one of many world’s fastest-growing economies, with GDP anticipated to develop by 6.5% in FY25. This progress is underpinned by sustained client spending, aggressive infrastructure growth, and a government-led capex push. Structural shifts, together with RBI’s anticipated charge cuts, ample liquidity measures, and a budgetary enhance to consumption, point out that FY26 may witness even stronger momentum. Nonetheless, near-term dangers corresponding to international commerce disruptions and stretched fairness valuations may pose challenges.
Company earnings stay resilient, with almost 70% of NIFTY 50 firms 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 total 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 personal corporates shifting focus in direction of mental property, innovation, and digital property as a substitute of standard 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 setting.
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 charge cuts turn out 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 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 growth however at a slower tempo. In the meantime, the Companies PMI rebounded to 59.0, underscoring resilient home demand. Auto gross sales have held agency, and strong 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, going through a good stronger barrier close to 23,500. On the draw back, speedy help is positioned at 21,900, with an important security web at 21,500. Liquidity circumstances have improved, however exterior headwinds, together with international 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 international cues and home earnings energy. Any decisive breakout above resistance ranges may set off contemporary upside momentum, whereas a breach of key help zones might 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. 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 12 months has been the divergence between worth and progress shares. Yr-to-date by 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 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 nasty 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 shoppers, whose confidence ranges are actually 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 impression, equating to a tax hike of 0.5% to 1.0% of GDP, which may translate into greater client costs in 2025 and 2026. Moreover, rising prices for gasoline, diesel, pure gasoline, and meals—notably as a result of avian flu affecting poultry—pose additional dangers to cost stability. Regardless of market expectations of aggressive charge 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 about to finish its steadiness sheet discount program (QT) in July, which may 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 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 focus is now on the upcoming US employment knowledge, which is able to 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 worth 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 predicted to take care of its upward momentum, with the potential to check the $2,935 stage because the greenback weakens and safe-haven demand rises. Current US financial knowledge indicators a slowdown, and a commerce warfare with key companions may additional weigh on progress, growing the chance of Federal Reserve charge cuts. Market expectations have now priced in charge reductions this 12 months, exceeding earlier projections. Moreover, key financial knowledge releases and the European Central Financial institution’s financial coverage stance stay essential components, with potential charge 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 international developments, together with US coverage modifications, reciprocal tax updates, potential Fed charge cuts, and actions in forex and oil costs. Domestically, consideration stays on India’s rate of interest trajectory, with one other RBI charge 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 latest correction has already erased earlier beneficial properties, bringing market returns to a flat stage on a one-year foundation. Given this backdrop, near-term consolidation is probably going, with market breadth anticipated to stay slender. 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 in keeping with its 10-year pattern, making massive caps comparatively extra engaging in comparison with the broader market.
With no robust constructive triggers within the speedy time period, the market might 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 needs to 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 enhancing credit score progress. Nonetheless, for this month, warning is warranted, and a selective strategy specializing in ‘Progress at a Cheap Worth’ 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 choice.
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