Market Review

Asset class performance trends

Geographical performance trends based on MSCI country level Indices

Sectoral performance trends

Global market performance (April 2025)

Global equity markets were turbulent this month, with US equities sharply declining following the "Liberation Day" tariff announcements. The VIX spiked above 50, bringing equities close to bear market territory. However, US markets recovered later in the month amid signs of a tariff pause and hopes for deescalation through bilateral negotiations. European markets also experienced a recovery, driven by hopes of easing trade concerns, expectations of trade negotiations, and the US softening automotive tariffs. European markets continued to be supported by hopes of increased expenditure, especially led by Germany. Key economic data and regional cues further contributed to the recovery. Conversely, Chinese markets remained negative due to profit booking and the delay in fresh stimulus measures from Beijing to counter higher US tariffs

Domestic Market Performance (April 2025)

The domestic markets faced volatility early in the month due to the reciprocal tariffs announced by the US President on April 2, which led to market uncertainty. However, the 90-day pause on these tariffs provided some relief. Consequently, the markets rebounded positively for the second consecutive month, with the Nifty index rising by 3.5%. Nifty Midcap 150 and Nifty Smallcap indices also participated in the rally, increasing by 4% and 1.7%, respectively. The market gains were driven by several factors: The India Meteorological Department's forecast of above-normal monsoon rainfall, along with the return of foreign portfolio investors and continued Domestic Institutional Investors support.

Additionally, RBI's decision to reduce the repo rate by 25 basis points to 6% and adopt an accommodative stance helped market sentiments. The RBI also relaxed lending norms which are anticipated to improve credit availability and support growth in the banking and financial sectors. Overall, multiple factors contributed to the market's positive performance.

Macroeconomic indicators:

Crude oil prices – Brent

The month saw crude oil prices decline due to concerns over rising supply from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, coupled with the potential impact of US tariffs. Prices fell further on expectations of increased output from Saudi Arabia and a weak demand outlook.

USD INR

For the month ended April 2025, the Rupee appreciated by another 1.1% against the US dollar. This is largely because the US Dollar Index (DXY) lost 4.6% due to fear of stagflation, i.e rising inflation and falling growth as also escalating trade war and policy uncertainty.

Commodity price trend

Forex reserves

India's foreign exchange reserves rose by 3.4% to $688 billion as of April 25, 2025.

Inflation

In March 2025, India's headline CPI inflation declined to 3.3% -a 67-month low. This decrease was primarily driven by moderation in food prices. The decline in global commodity prices also helped ease some of the pressures from imported inflation.

Core inflation remained steady at 4.1% in March 2025 due to persistent price pressures in non-food and non-fuel items, particularly in gold, which contributed significantly.

Industrial production

Industrial production also rose, driven by gains in the electricity and manufacturing sectors in March 2025.

PMI Indicators

The Manufacturing Purchasing Managers Index (PMI) increased in April 2025, indicating strong business activity driven by robust demand and a sharp rise in international orders. Services PMI also rebounded, supported by strong demand from both domestic and international markets and an increase in new order flows.

GST Collection

GST collections for April 2025 stood at INR 2.36 trn. Gross GST collections have shown sequential improvement to grow 13% YoY.

FII/DII equity flows

FIIs and DIIs were net buyers for the month.

Domestic Interest rate trend

The RBI unanimously reduced the policy rate by 25 basis points to 6% and decided to change the stance from neutral to accommodative in its April 2025 monetary policy meeting.

Domestic Liquidity Conditions

Liquidity conditions eased with a surplus of INR 1.29 lakh crore at the end of April 2025, recovering from the deficit observed in the last week of March 2025. This is due to the Reserve Bank of India's (RBI) strategic interventions, including purchases from OMOs, VRR auctions, and long-term USD/INR Buy/Sell Swap auctions, which have alleviated liquidity tightness in the fixed income market.

Yield Curve

10-year yield fell from 6.58% to 6.36% (23 basis points decline) as softening of interest rates globally, downward revisions in domestic inflation and growth forecasts, expectations of dovish interest regime in coming months, led to yields moving southwards.

Domestic Macros Heatmap

Source: Bloomberg, RBI, MOSPI, Morgan Stanley