India is anticipated to regain its position relative to Emerging Markets in 2025, supported by several fundamental factors. The GDP figures for the quarter ending December 2024 confirm the recovery trajectory, following the lowest point in the quarter ending September 2024. The outlook suggests a widespread consumption recovery, with urban demand set to increase due to income tax reductions, complementing the strong rural consumption patterns.
Despite global economic uncertainties and geopolitical challenges, Morgan Stanley anticipates GDP growth of 6.3% YoY in FY2025, followed by 6.5% in FY2026-27. The headline CPI has declined to approximately 4% from its recent peak, influenced by declining food prices, while core inflation remains stable. Food prices, comprising around 46% of the CPI basket, are expected to decrease further, influencing the overall inflation outlook.
The report projects inflation will reach approximately 4.3% YoY in FY2026-27, down from 4.9% YoY in FY2025. The Reserve Bank of India (RBI) has initiated comprehensive easing measures across rates, liquidity, and regulations. Following the repo rate reduction in February’s policy meeting, Morgan Stanley anticipates an additional 25 basis points cut during the April policy session in this easing cycle.
The budget focuses on strengthening the economic recovery through consumption stimulus via income tax reductions and increased capital expenditure allocation, while maintaining fiscal discipline to ensure macroeconomic stability. After hitting a low of 21,964 levels, the Nifty 50 has staged a modest 3% recovery in the last four trading sessions. Where does the market go from here?
With Foreign Institutional Investors (FIIs) pulling out, DIIs have stepped in as a stabilizing force. Their continuous buying has supported the market and cushioned the fall caused by the FII exodus. Recent economic data shows robust indicators with improving GDP growth rates and industrial production.
This signals underlying strength in the economy which could support the markets going forward. Q4 earnings season has kicked off on a positive note, with several companies reporting better-than-expected results. Strong corporate earnings can uplift investor sentiment and drive the market rally.
The Indian government has announced various measures aimed at boosting economic growth, including infrastructure spending and policy reforms. These initiatives are expected to have a positive impact on market sentiment. Global markets have been performing well, driven by positive economic data and strong corporate earnings in other major economies.
This global rally could provide the momentum needed for India to join in. As these factors converge, there is cautious optimism that the Indian market could potentially ride the wave of a global rally despite challenges such as the FII exodus and external pressures like Trump tariffs. In the coming week, traders will closely watch interest rate decisions from the US Federal Reserve and the Bank of Japan, as these will shape market trends.
Technically, the NIFTY50 index is consolidating between 22,800 and 22,300. A decisive breakout from this range will offer clearer direction. Crucial support for NIFTY50 is around the 21,800 level, while resistance is around 23,300.
Amid weak global signals, markets failed to extend the previous week’s gains and traded within a narrow range.
India’s economic recovery driven by GDP
The NIFTY50 index hovered around 22,500 and closed at 22,397, down 0.3%.
The volatility stemmed from U.S. President Donald Trump’s tariff threats, which triggered a sharp decline in U.S. indices. However, domestic factors remained positive. India’s retail inflation dropped to 3.75% in February, below the Reserve Bank of India’s 4% target.
Additionally, lower crude prices and a sustained decline in the dollar index helped limit losses. All major sectoral indices ended the week in the red except FMCG and Pharma, which were flat. IT (-4.4%) and PSU Banks (-2.4%) were the major losers.
Meanwhile, sentiment in the broader markets remained weak as the Midcap 100 index fell 2.1% while the Smallcap 100 index plunged 3.9%. The breadth of the NIFTY50 index remained sluggish as the average 35% of the NIFTY50 stocks traded above their respective 50-day moving average last week. This indicator has failed to break above the crucial 50% level for more than five months.
Foreign Institutional Investors (FIIs) maintained their stance on index futures, with the long-to-short ratio holding steady at 19:81. This reflects a net open interest (OI) of -1.8 lakh contracts, indicating a predominantly short position. Since the start of 2025, both the net OI and the long-to-short ratio have favored short positions.
Unless there’s substantial unwinding or short-covering, the broader market trend may remain weak. However, the intensity of FII sell-offs in the cash market has eased compared to the last five months. While they remained net sellers, the ₹5,738 crore worth of shares sold marked the lowest weekly figure since October 2025.
Meanwhile, Domestic Institutional Investors (DIIs) continued to be net buyers, purchasing shares worth ₹5,499 crore. The technical structure of the NIFTY50 index remains range-bound as per the weekly chart. It formed a small red candle and failed to close above the previous week’s high, thus failing to confirm the bullish reversal hammer candlestick pattern.
The crucial support for the index remains around the 21,800 zone, while the resistance is around 23,300. Within this range, the index may remain volatile and range-bound. A breakout of this range will provide further directional insights.
The technical structure of the SENSEX as per weekly chart remained range-bound, consolidating broadly within the previous week’s range. It also faced resistance around the 74,800 zone and failed to confirm the bullish hammer candlestick pattern on the weekly chart. The short-term trend of SENSEX has turned sideways within the broad range of 75,600 and 72,000.
A break of this range on a closing basis will provide further directional clues. Traders should monitor the 22,800 to 22,300 range on a closing basis. A breakout on either side will provide short-term direction.
The broader trend remains confined between the 23,300 resistance and 21,800 support levels.
