Bullish days ahead
The market will continue to be bullish as GDP growth rate is likely to be above expectation. The boom in domestic consumption and fall in inflation will keep the investors’ sentiment up.
During the first half of the current financial year, the equity markets remained on an upward trajectory with an intermittent volatility amidst the US tariff threats, trade policy uncertainty and geopolitical tensions in various parts of the world.
The BSE Sensex rose 3.9 per cent in the first half of the current financial year. The broader market indices outperformed the Sensex during the period. While the BSE MidCap gained 7.7 per cent, BSE SmallCap index rose by 12.1 per cent. India Volatility Index, a measure of short-term expected volatility of Nifty 50, declined by 10.2 per cent during the same period. All BSE sectoral indices, except BSE Information Technology Index gained during the period.
After an initial decline, markets recovered in April as tariff-pause announcements by the US and low domestic CPI inflation print for March 2025 lifted sentiments. However, the Operation Sindoor taking on Pakistan’s terror base, took the market for a beating. But the war did not last long as Pakistan begged for ceasefire. The sudden end of the war fired the market again in mid-May. The RBI’s decision to transfer a record surplus to the Government of India also aided the bulls. What may be called the front loading of monetary policy easing by the Reserve Bank fuelled the rally to continue in June with a minor correction after a rise in geopolitical tensions in the Middle-East. In the following month, the Indian equity markets underperformed other global markets due to the ruthless US tariff measures and uncertainties. The mixed corporate earnings results in the first quarter of the current fiscal also left an adverse impact on the bulls. However, the markets gained in mid-August after India’s sovereign rating upgrade by a global credit rating agency.
The announcement of the second GST reforms fuelled a rally. The reform contributed to a sustainable revival of investor sentiment. While the trend remained bullish, the reports of the GDP growth, strong consumption growth, strong performance of the manufacturing sector etc, kept the market bullish and investors active, barring a short term dip after a steep hike in H1B visa fees by the US.
In the first quarter foreign portfolio investors were buyers. But they turned net sellers in the second quarter. The Domestic Institutional Investors (DIIs), especially mutual funds, acted as a counterbalancing force by remaining net buyers and provided resilience to the Indian equity markets. The inflows into mutual funds have been supported by sustained and expanding reach of systematic investment plans (SIPs). Average monthly contribution to mutual funds through the SIP route increased to ₹27,464 crore in the first five months from ₹25,905 crore reported in the second half last financial year.
In fact, FPIs were net sellers by ₹70,000 crore up to September 26 while DIIs were net buyers by ₹3.7 trillion as on that day. in the equity market. The primary equity markets witnessed mobilisation of ₹1.8 trillion in the first five months as against ₹2.2 trillion in the second half of last year. the SME IPO aggregated to ₹4,430 crore, which constituted only 2.4 per cent of the total primary issuances as against ₹4,664 crore in the second half of last year.
