Sensex, Nifty defy turbulence to end FY25 with 5% gains, marking second straight year of growth

Driven by a strong comeback rally of 6% in March, Indian equities ended the financial year 2024-25 on a positive note for the second consecutive fiscal. The BSE benchmark Sensex and the NSE Nifty50 delivered positive returns of 5% each in the current fiscal as the market ended its five-month losing streak in March 2025 – the longest monthly decline since 1996.

The equity benchmarks, Sensex and Nifty, started fiscal 2025 on a positive note, rising up to 16% in the first half and hitting their respective highs of 85,978 and 26,277 in September. However, the market then entered a downward spiral, plunging up to 16% between October and February, breaking its 29-year record with five consecutive months of decline. This was the first time since 1996 that the Nifty50 logged losses for five straight months, a rare occurrence that has only happened twice since the National Stock Exchange (NSE) benchmark was launched in July 1990.

Market loses ₹94 lakh crore between October and February

The sustained sell-off in the Indian equity market wiped out a staggering ₹94 lakh crore from investor wealth over five months (October-February). The market capitalisation of BSE-listed companies fell to ₹384 lakh crore at the close of trade on February 28, down from September’s record high of ₹478 lakh crore.

February was the worst month for the Indian stock market since the COVID-19 pandemic, with equity benchmarks falling nearly 6% and eroding investors’ wealth by ₹40 lakh crore. During this period, the Nifty50 lost 1,357 points (5.9%), while the Sensex plunged 4,300 points (5.5%), as the market faced headwinds from relentless selling by foreign institutional investors (FIIs) and mounting economic uncertainty amid U.S. tariff concerns. The persistent fund outflow by foreign investors was also attributed to higher valuations, weak earnings, and slowing economic growth. Foreign portfolio investors (FPIs) pulled out over ₹1 lakh crore between October and February.

Market breaks five-month losing streak in March

Bucking the downward trend, the market staged a strong recovery in March despite heightened uncertainty over U.S. President Donald Trump’s aggressive tariff policies, slated to be announced on April 2. The remarkable turnaround was largely driven by a shift in FII strategy—from sustained selling to modest buying—which became evident in the week ending March 21 and intensified in the following week.

Heavy FII buying in the last few days of March substantially reduced the total FII sell-off in the month to ₹6,027 crore. Since FIIs invested ₹2,055 crore through the primary market, the net FII selling figure for March came down to just ₹3,972 crore, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

What prompted FIIs to turn buyers?

The resurgence of FIIs as buyers contributed to a sharp 6% recovery in the Nifty. FIIs returned to Indian markets as valuations turned attractive following a nearly 16% correction from the September 2024 peak.

“Recent appreciation in the rupee led to a reversal of the momentum trade toward U.S. investments. India’s macroeconomic indicators—GDP growth, IIP, and CPI inflation—also improved, paving the way for a market rally,” said Vijayakumar of Geojit Investments.

Going forward, the trend in FII flows will depend largely on Trump’s reciprocal tariffs expected on April 2. If the tariffs are not severe, the rally may continue, he added.

What lies ahead?

Analysts remain cautiously optimistic about the market’s outlook due to the recent recovery and easing valuations. “Investors are advised to stick to quality businesses with supportive valuations for a medium- to long-term investment horizon,” SBI Securities said in a note.

Technically, Nifty respected the 100-day exponential moving average (100-DEMA) support near 23,400 and formed a red candle on the daily chart. The index continues to face resistance in the 23,800–23,810 zone, and a decisive move above 23,810 could extend the rally towards 24,000–24,080, where the 200-day simple moving average (200-DSMA) is positioned. On the flip side, sustaining below 23,400 could lead to further weakness toward the 23,200–23,000 levels. Traders should monitor these levels for potential opportunities,” said Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd.

Devarsh Vakil, Head of Prime Research at HDFC Securities, noted that if Nifty falls below 23,400, the index could decline further to the next support level of 23,142. However, a move above 23,650 could trigger fresh bullish momentum, potentially pushing the index toward 23,869 and 24,125, he said.