Mumbai, April 25, 2025: PL Asset Management, the asset management arm of PL Capital Group (Prabhudas Lilladher), one of India’s most trusted financial services organizations, has released its latest ‘PMS Strategy Updates and Insights’ report. The report states that in a month dominated by global macro uncertainty, India’s equity market has shown its resilience, and is well-positioned in a world reshaped by trade and tariffs.
The BSE 500 recorded a 6.25% gain in March — its best monthly performance in 15 months, indicating that much of the market excess has likely been corrected. India’s macro fundamentals are notably resilient. GDP growth is projected at 6.5% in FY25, supported by strong domestic consumption, capex, and manufacturing upcycle. The March Manufacturing PMI rose to 58.1 — an eight-month high — while industrial output expanded 5% YoY in January.
Nifty 50 Stands Strong
The re-emergence of US-China trade tensions in April 2025 has impacted global indices, echoing the market behavior last seen during the 2018 trade war. While indices like the S&P 500 and Nasdaq fell by 13% and 11% respectively, India’s Nifty 50 remained relatively resilient, falling just 3%.
The Signs Of Rotation
Spreads for higher risk factors are near zero, a point from which historically markets have entered a recovery phase. In recent months, Quality factor bottomed out, and we’re now seeing early signs of a rotation back towards Value, suggesting a market tilt towards fundamentally cheaper, cyclical names. Momentum’s dominance has faded sharply, as investors shift focus to low volatility. The Smallcap outperformance has unwound, with rotation back into Largecaps, reflecting a market preference for size and stability. These are signs as the market positions itself for a recovery phase.
Pessimism Built Into Prices
The recent trend in early 2025 shows a moderate rise in stocks near their lows, suggesting caution among investors amid potential uncertainties or corrections. However, with extreme pessimism already built in, this could signal that a rebound is on the horizon as markets begin to price in a potential turnaround.
Narrow Breadth Market
Post COVID-19, Nifty 500 has delivered robust returns, with 1-year rolling returns averaging around 26% since the March 2020 trough. This was driven by liquidity-fueled, broad-based market rallies on global stimulus and risk-on sentiment. However, by March 2025 (from March 2024), 1-year rolling returns has moderated to 6.23%, reflecting a more selective market driven by fundamentals rather than liquidity.
Oversold Market With Limited Downside Risk
In March and September 2021 and 2024, a large portion of stocks had positive returns, but fewer were able to beat the benchmark index, indicating that the index’s gains were driven by a smaller subset of stocks. The recent convergence of the two lines suggests a narrowing of market breadth, where fewer stocks are participating in the overall market gains. This could signal increased risk as market performance becomes more dependent on a smaller number of leading stocks.