Bumpy road ahead

Despite sharp correction in the recent past, the equity market is expected to remain fragile in near-term and heightened volatility is projected to persist in Q1 CY25. “We expect near-term weakness and heightened volatility for Indian equities in Q1 CY25. However, a gradual consumption recovery is anticipated in H2 CY25, led by an improvement in employment trends, a revival in unsecured lending, and an uptick in welfare spending, said Emkay Institutional Equities in a recent report. The research house projects Nifty to be at levels of 25,000 by December 2025, and FPI selling to subside by Q2 CY25.

“Market sentiment is expected to remain cautious in the near term due to persistent pressure on the rupee, ongoing FII outflows, and tariff-related developments,” said Vinod Nair, Head of Research, Geojit Financial Services. Key macroeconomic indicators, including the U.S. Core PCE and GDP data for both the US and India, will be instrumental in shaping expectations for the central bank's future monetary policy, he added.

Foreign Institutional Investors (FIIs) have been a key driver of India's stock market for years, but for the past five months there has been a significant foreign fund outflow from the domestic equity market. They have pulled out equities worth over ₹2 lakh crore since October 2024, while total selling in 2025 stood at ₹11,2492 crore. After withdrawing equities worth ₹81,903 crore through the exchanges in January, FIIs pulled out another ₹30,588 crore so far in February, which can be attributed to higher valuations and weak corporate earnings, and slowdown in economic growth.

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Nifty monthly losses

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