Investment Ideas Note
March 2025 by Wallet Wealth
S.Sridharan, Founder, https://www.walletwealth.co.in/
Market Outlook
When the market opened on 3rd February, the
first day of trading after the budget, the SENSEX
fell up to 700 points, and Nifty was trading below 23,250 points. The reason
for this sharp decline was attributed to weak global signals.
The most common reason for this fall was attributed to
Trump’s tariff imposition on China, Mexico and Canada. He
imposed 25% tariffs on Mexico and Canada while 10% on Chinese imports.
Other reasons which contributed to the sharp
fall on the month’s opening day was falling Rupee, uncertainty in monetary
policy, heavy selling of FIIs due to rising US bond prices, high equity valuation
and weak earnings reports of Indian companies.
Let’s see the performance of key indices in February 2025,
|
Index
Performance February 2025 |
|
||
|
Date
|
February 3,
2025 |
February 28,
2025 |
Gain/Loss |
|
BSE
Sensex |
77186.14
|
73198.1 |
-5.2%
|
|
BSE
Midcap |
42502.05
|
38592
|
-9.2%
|
|
BSE Small cap |
49212.3 |
43082.9 |
-12.5% |
February has not been favourable for small-cap and
mid-cap stocks. As we can observe from the table, Nifty small caps continue its
falling streak throughout this month.
BSE Sensex, Midcap, and Small-cap recorded losses in
February. BSE Sensex has lost about 5.2%, midcap has fallen by 9.2% and small
cap has fallen by 12% in February.
The rising US bond yields and the US
Dollar were driven by strong US economic data. This makes investment more a race
in the US market, and unlikely US rate cuts were the reason for the hike in US
Bond yields.
FPIs also sold huge shares in the Indian equity market
due to uncertainty hovering around Trump’s trading policies and protest measures.
In summary, factors such as FPI selling, high US bond
yields, strong economic data, and uncertainty about Trump’s policies have
caused a setback in the Indian equity market.
|
NIFTY 50 |
-5.3% |
|
Nifty midcap 150 |
-9.3% |
|
Nifty Bank |
-1.8% |
Nify 50 fell by 5.3% in February, nifty midcap has fallen
by 9.3% and Nify Bank fell by 1.8 in February 2025.
|
MF/FII
activity |
FII
|
MF |
|
Equity |
-46,599.8
|
36,163.05 |
|
Debt |
-5,200.12
|
- 49,263.39
|
|
Total |
- 75,335.55 |
2,384.71 |
Indian equity market
witnessed an outflow of Rs.7,300 crores in the first week of February. This outflow
was followed by Rs.72,677 outflow in January.
This oufflow was majorly arributed to weak global cues,
as discussed previously. During these first few weeks of the equity sell-off
period, debt witnessed an inflow of Rs.1215 crores.
FII sold Rs.72,677.21 crores worth of equity and Rs.2658
crores worth of debt in January. Concurrently, mutual funds purchased Rs.57,
990.42 crores of equity and sold Rs.2384.71 crores of debt during the same
period.
While FIIs sold Rs.46,499 worth of equity and Rs.5200
crores worth of debt in February. Contrary to the dives ng by FIIs, the mutual
funds invested Rs.36163.05 worth debt in the Indian equity market.
Overall, the Indian equity market experienced a sharp
fall in February 2025, caused by heavy selling pressure with both Ni y and
Sensex falling sharply. Concerns over trade policies of the US caused this
highly volatile February trading session.
What’s in store for us next?
GDP
data: The IMF (International Monetary Fund), projects the GDP
growth for India in 2025 and 2026 to be at 6.5%, which reflects stable growth
despite the global uncertainties. The RBI is also expected to implement further
rate cuts to support growth amidst the global uncertainties.
Indian
equity market: After the significant decline of the Indian equity
market, the market is anticipated to rebound with a gradual recovery throughout
2025.
Trade
challenges: Multiple countries face the consequences of
stringent tariff policies in the U.S. But these challenging times could pave
the way for Indian exporters to focus on market diversification.
Rural
consumption: Projections suggest that the rural consumption
will increase driven by favourable monsoon seasons, government initiatives and
good agricultural output. But factors such as stagnant rural wage growth and
potential urban consumption slowdown can influence the rural consumption
landscape in future.
Look at
the past correction:
GLOBAL FINANCIAL CRISIS
& COVID Crisis and Returns
|
Index |
1-Year post-GFC |
1-Year post-COVID |
3-Year post-GFC |
3-Year post-COVID |
|
Sensex 30 |
75%
|
68% |
138%
|
103%
|
|
Midcap
|
126%
|
91%
|
173%
|
131% |
|
Small cap |
160%
|
114%
|
195%
|
165%
|
Following the 2008 Global Financial Crisis (GFC) and the
COVID-19 market crash, the Indian stock market displayed remarkable resilience
and recovery.
• One
year after the GFC, the Sensex 30 surged 75%, while the Midcap and Small-cap
indices gained 126% and 160%, respectively.
• Similarly,
one year after the COVID-19 crash, the Sensex 30 rose by 68%, with the Midcap
index increasing 91% and the Small-cap index soaring 114%.
Looking
at a longer horizon:
• Three
years post-GFC, the Sensex 30 had climbed 138%, while the Midcap and Small-cap
indices posted even stronger gains of 173% and 195%, respectively.
• Three
years post-COVID, the Sensex 30 advanced 103%, whereas the Midcap and Small-cap
indices rose 131% and 165%, respectively.
2008 – GLOBAL FINANCIAL
CRISIS
|
Index |
09/01/08
|
17/02/2025 |
Gain
In % |
02/12/08
|
17/02/2025
|
Gain
in % |
|
|
|
|
|
|
||||
|
SENSE 30 |
20,870
|
75,997 |
264
% |
8,739
|
75,997
|
770
% |
|
|
MID CAP |
9,770
|
39,932
|
308
% |
2,805
|
39,932
|
1323
% |
|
|
|
|
|
|||||
|
SMALL CAP |
13,369
|
45,157
|
238
% |
3,252
|
45,157
|
1288
% |
|
The 2008 Global Financial Crisis had a significant impact
on the Indian stock market, with major indices witnessing a sharp decline
followed by a strong recovery over the years.
• The
Sensex, which stood at 20,870 on January 9, 2008, surged to 75,997 by February
17, 2025, reflecting a 264% gain. From its lowest point of 8,739 on December 2,
2008, the index rose by a staggering 770%.
• The
Midcap Index rose from 9,770 in January 2008 to 39,932 in February 2025,
recording a 308% gain. From its bottom of 2,805 in December 2008, it surged 1,323%.
• The
Small cap Index, which was 13,369 in January 2008, climbed to 45,157 in
February 2025, marking a 238% increase. From its lowest point of 3,252 in
December 2008, it gained 1,288%.
2008 – GLOBAL FINANCIAL
CRISIS RECOVERY
|
Date 09/11/10
|
From Lows Dec 2008 (%) |
|
SENSEX
|
+139.52 |
|
|
|
|
MIDCAP
|
+210.30
|
|
SMALLCAP |
+242.80
|
2008
Global Financial Crisis Recovery
By November 9, 2010, the indices had recovered
significantly from their December 2008 lows:
• Sensex
gained +139.52%
• Midcap
Index surged +210.30%
• Small
cap Index rebounded by +242.80%
COVID-19 Recovery
|
Metric
|
|
|
|
30/11/20
|
From
Lows March 2020 (%) |
|
|
SENSEX
|
44,149
|
+49.82
|
|
|
|
|
|
MIDCAP
|
16,915
|
+60.03
|
|
SMALLCAP
|
16,875
|
+75.62 |
COVID-19
Recovery
Following the market crash in March 2020, the indices
showed a strong rebound by November 30, 2020:
• Sensex
climbed to 44,149, marking a +49.82% gain from its March 2020 lows.
• Midcap
Index surged to 16,915, recording a +60.03% increase.
• Small cap Index jumped to 16,875, gaining +75.62%.
Equity
The market cap over GDP ratio is currently at 109.68.
This shows that the market is fair valued. The zone indicates a good entry
point and li le cautious while investing for a short term.
The investors can focus investing on large cap &
hybrid funds and investors who would like to take a little risk can enter
technology funds at this juncture.
It is advisable not to invest lumpsum and invest into
equity mutual funds over a 20–24-week period. As the valuations of small cap is
on the higher side and hence one can wait and watch before investing in small
cap. We are of the opine that the large & mid cap funds would outperform
the small cap this year.
Debt
The 10-year G-Sec is trading at 6.84% and the 5 Year G-Sec is trading at 6.73%. One can start looking at high quality corporate bonds and banking & PSU bond with the maturity of 3 years could possibly generate a decent double-digit return.
The best time to enter duration
management funds would be faring better during this point in me. If one would
like to look at parking money for a period of less than 1 year can look at
investing Ultra short / money market funds.
We strongly recommend the investors to avoid credit risk
funds now.
S.Sridharan, Founder, https://www.walletwealth.co.in/
If you need any advice on investments, do call us at 9940116967.
Team Wallet Wealth,
AMFI Registered Mutual Fund Distributor
2nd Floor, No.8A, 2nd Main Road,
Nanganallur,
Chennai – 600 061
Phone: 044 – 4861 2114
Disclaimer: The above information and
views are personal and confidential. The information herein is based on information
obtained from sources believed to be reliable, but the Company does not make
any representation or warranty, express or implied, as to its accuracy,
completeness, , or correctness for any particular purpose. Opinions expressed
are of our personal and subject to change without notice.
