Indian Equities Defy Global Headwinds: What’s Fueling Market Resilience?

In the face of volatile global cues and heightened geopolitical uncertainty, Indian equities have showcased remarkable resilience. Over the last month, the Nifty 50 has bounced back strongly from its April 7 low of 22,160 to surpass 23,500, marking a nearly 6% rally. This performance is especially noteworthy given the subdued global market environment driven by tensions in the Middle East, uncertainty around US interest rates, and patchy earnings from major global corporates.

So, what exactly is keeping the Indian markets buoyant while the rest of the world wavers? The answer lies in a confluence of favorable domestic macroeconomic indicators, monetary policy expectations, and a moderation in valuations. Let’s delve into the key factors supporting this upward momentum in Indian equities.

1. Strong Monsoon Outlook Bolsters Rural Economy

One of the most critical variables for India’s predominantly agrarian economy is the monsoon. The Indian Meteorological Department (IMD) recently projected an above-normal monsoon for 2025, estimating seasonal rainfall at 105% of the Long Period Average (LPA). This forecast could not have come at a better time, as it promises to support the rural economy, which has been lagging behind urban India in terms of growth.

A good monsoon contributes significantly to agricultural productivity and rural incomes. This, in turn, fuels demand for a wide range of goods and services, from consumer durables to fertilizers and two-wheelers. Moreover, a strong monsoon helps keep food prices in check, thereby curbing inflation. For policymakers, this also creates a window to redirect fiscal efforts more efficiently while ensuring broader economic stability.

Policymakers at both the central and state levels now have a critical opportunity to capitalize on this favorable monsoon outlook. By facilitating efficient distribution of agricultural inputs and investing in rural infrastructure, they can amplify the positive impact of a good harvest across the economy.

2. Substantial Easing in Inflation Offers Policy Leeway

Inflation has been a persistent concern over the last couple of years, particularly due to supply chain disruptions and commodity price volatility. However, recent trends offer a much-needed respite. Retail inflation in March 2025 dropped to 3.34%, marking a six-year low and significantly undercutting the Reserve Bank of India’s target of 4% for FY2025.

The primary driver of this cooling inflation has been a sharp decline in food prices. In March, food inflation stood at just 2.69%, down from 3.75% in February. Vegetable prices, in particular, declined by over 7% on a year-on-year basis. Such a dramatic easing in food inflation has far-reaching implications. It improves household purchasing power, especially in low-income segments, and strengthens the case for further rate cuts by the RBI.

This trend aligns well with the central bank’s dual mandate of maintaining price stability while supporting growth. With inflation well under control, the RBI now has the policy space to shift its focus toward boosting economic momentum through monetary easing.

3. Increasing Probability of Rate Cuts

Given the substantial decline in inflation and mounting global economic uncertainties, expectations for rate cuts by the RBI are gaining traction. Analysts now anticipate that the repo rate could be reduced to 5.25% during this easing cycle. With inflation data consistently surprising on the downside, this forecast seems increasingly plausible.

Such a shift in monetary policy would have a multifaceted impact. Lower interest rates reduce borrowing costs, thereby supporting credit growth, private consumption, and corporate investment. Sectors like real estate, banking, and auto, which are sensitive to interest rates, stand to benefit significantly. Additionally, a dovish RBI stance could boost investor sentiment and catalyze further inflows into equity markets.

It is also worth noting that global central banks, including the US Federal Reserve, are adopting a more cautious approach given the geopolitical volatility and slowing growth indicators. This global shift toward accommodative policy further enhances the relative attractiveness of Indian assets.

4. Valuation Comfort Post-Correction

Valuations, which had been a cause for concern for many investors over the last year, have now moderated meaningfully. Following the correction observed between January and March, the Nifty now trades at a 1-year forward P/E of approximately 18.1x. This is about 7% below its 5-year average and in line with the 10-year average.

This valuation reset has also extended to the broader market. Midcap and small-cap stocks, which had become expensive due to sustained inflows and high investor interest, have seen a pullback. This offers a more balanced risk-reward equation for long-term investors.

Moreover, despite some downward revisions in earnings expectations for CY25, particularly after a weak Q4 start in sectors like IT, the structural growth story for Indian corporates remains intact. Continued policy reforms, rising private sector investment, and strong domestic consumption are expected to drive earnings growth over the medium to long term.

The Broader Economic Narrative

Looking beyond the immediate drivers, India’s long-term growth narrative remains compelling. The government’s focus on capital expenditure, particularly in infrastructure and manufacturing, continues to lay the groundwork for a more robust and diversified economic base. At the same time, private sector investments are beginning to gain momentum, signaling a broader recovery in business confidence.

Additionally, the real estate sector, which had been subdued for several years, is showing signs of revival. Improved affordability, lower home loan rates, and strong demand in residential housing are contributing to this recovery, which in turn supports a range of allied industries.

In conclusion, while global challenges and market volatility may persist, India’s domestic fundamentals provide a strong counterbalance. With supportive macro indicators, easing inflation, likely policy accommodation, and attractive valuations, Indian equities are well-positioned to continue their upward trajectory. For investors, staying the course and aligning portfolios with India’s evolving economic story may prove rewarding in the quarters ahead.

Market this week

Source: BSE and NSE

• Indian markets recorded their strongest weekly gains since February 2021 during the holiday-shortened week.
• The rally was broad-based, driven by buying across sectors and supported by several positive cues.
• Key drivers included continued FII inflows, five-year low inflation, softening crude oil prices, expectations of an above-normal monsoon, and minimal impact from the escalating US-China trade tensions.
• All sectoral indices closed the week in the green. Nifty Realty and Nifty Private Bank indices led the gains, each surging 7%. Nifty Bank jumped 6.4%, while Nifty PSU Bank rose 5.6%. Nifty Media gained 5%, and both Nifty Oil & Gas and Auto indices added 4% each.
• Foreign Institutional Investors (FIIs) turned net buyers after two weeks of selling, investing ₹14,670.14 crore during the week ended April 17. Meanwhile, Domestic Institutional Investors (DIIs) were net sellers, offloading equities worth ₹6,470.52 crore.

Weekly Leaderboard

Source: BSE

Stocks that made the news this week:

KFin Technologies surged 8% intraday on Thursday, marking its third consecutive session of gains. The rally was triggered by the company’s announcement of a strategic acquisition in Singapore’s fund administration space. KFin will acquire a 51% stake in Ascent Fund Services for $34.7 million, with plans to gradually purchase the remaining 49% stake by FY30, eventually becoming the sole promoter. This move highlights KFin’s ambition to expand globally, and the stock has now delivered over 500% returns from its post-IPO low.

Suzlon Energy shares rose 2% after the company announced a significant order win from Sunsure Energy. The 100.8 MW wind power project, which will be set up in Maharashtra’s Jath region, marks Sunsure’s first entry into wind energy. Under the agreement, Suzlon will supply 48 S120 wind turbines with Hybrid Lattice Towers, each with a capacity of 2.1 MW. Suzlon will also handle installation, commissioning, and full project execution, reinforcing its position in the renewable energy sector.

Angel One Ltd. witnessed a sharp decline in its share price during early trade on April 17, following the release of weak Q4 FY25 results. The brokerage reported a steep 48.7% drop in net profit to ₹174.5 crore and a 22.2% decline in consolidated revenue to ₹1,056 crore, compared to the same quarter in FY24. The disappointing numbers reflect challenges in the capital markets business amid regulatory changes and market volatility.