Market Outlook
| Feb 28, 2025 | 1-Month |
1-Year |
|
| Rupees per Dollar | 87.51 | 86.62 | 82.91 |
| Oil (dollars per barrel) | 73.18 | 76.76 | 83.62 |
| Retail inflation (CPI) | 4.31% (Jan) | 5.22% | 5.10% |
- In February, RBI cut the Repo rate by 0.25% from 6.50% to 6.25%, with the decision being unanimous amongst all Monetary Policy Committee (MPC) members. RBI projected real GDP growth for the FY2026 at 6.7% and CPI inflation at 4.2%
- In order to address the liquidity deficit in the system, RBI announced a slew of liquidity measures during the month which included a combination of Open Market Operations (OMOs), FX swaps and Variable Rate Repo (VRRs)
- Large supply in State development loans (SDLs) and muted demand in long dated government securities put upward pressure on the long bond yields during the month
- We remain ‘neutral’ on the outlook for bond markets
- We expect longer term yields to remain under pressure on the back of high supply and muted demand from long-term players. We expect the 10 year G-sec yield to trade in a range of 6.70%-6.85% in the near term
- Market will be watchful of global developments and its impact on currency
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -5.9 | 0.6 | 9.6 |
| BSE100 | -6.7 | 0.3 | 10.5 |
| NIFTY500 | -7.9 | -1.0 | 11.6 |
| NIFTY Midcap100 | -10.8 | -0.9 | 19.3 |
At February 28, 2025
Nifty was down 5.9 % for the month of February 2025
- Markets continued to remain weak due to global uncertainty and weak Q3 earnings season
- FIIs remained seller during the month while DIIs continued buying
- Within BSE 100 index, amongst sectors Finance/Bank outperformed while Capital Goods/Technology underperformed the broader market
Our outlook remains cautious in the short term and positive in the medium term
- Uncertainty related to tariff wars and geopolitical risks could impact growth and capital flows in near term
- Domestic GDP growth has moderated and came at 6.2% in Q3-FY2025
- However, with a more accommodative stance from RBI (CRR cut, rate cut, liquidity infusion) we should see a gradual pick up
- Government is also looking to boost consumption demand by way of tax cuts
- The Nifty’s P/E at 20x for FY2025E and 19x for FY2026E is trading near its 5-year average
In the medium term, we expect certain important drivers for growth:
- India benefits from structural levers in the form of demographic benefits, rising formalisation, manufacturing focus and digitisation
- Corporate balance sheets remain strong which positions them well for the next leg of growth
- Key monitorable will be earnings trajectory
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 12%
COMP/DOC/Mar/2025/63/8519
