The recovery ended the longest losing streak witnessed by benchmark Nifty 50, its worst in more than 25 years. To be sure, doubts persist on whether this is just small cheer in an overall picture of decline for the markets.
Several global indices, including Germany’s DAX, France’s CAC 40, Hong Kong’s Hang Seng, and Taiwan’s Weighted Index, also closed on a positive note, lifting investor sentiment in the domestic market as well.
After a rough month—where Nifty Auto tumbled 12%, Nifty IT slid 11%, and Nifty FMCG dipped 9%—these sectors staged a strong comeback on Wednesday, recording growth of 2.6%, 2.1% and 1.5%, respectively.
Leading the charge were heavyweights like ITC (up 3.6%), Reliance Industries (1.3%), Mahindra & Mahindra (4.1%), Bharti Airtel (2.2%), and Infosys (up 1.1%).
Meanwhile, the Nifty 50 rose 1.2% to 22,337.30 and the BSE Sensex gained 1% to 73,730.23. However, it was the mid- and small-caps that stole the show. Nifty Smallcap 250 jumped 2.7%, and Nifty Midcap 100 surged 2.4% on Wednesday.
According to provisional data from BSE, foreign institutional investors (FIIs) offloaded ₹2,895 crore worth of Indian equities, while domestic institutional investors (DIIs) stepped in as net buyers, purchasing ₹3,371 crore.
Experts said the return to green of the market on Wednesday points to bargain buying, with investors jumping in to grab stocks on the downward curve.
Chirag Patel, CFA & Co-founder at ValueMetrics Technologies, said that at present, the Nifty 50 has undergone a 16% price correction, but its valuation has dropped even further—by 19%. The valuation drop, he said, is due to both the recent price corrections and the earnings growth of assets during this period.
Patel further pointed out that since January 1999, Nifty 50 has experienced 11 corrections exceeding 15% up until March 2025. “While price corrections are often closely analyzed, valuation corrections tend to be overlooked,” he said.
‘Only a relief rally’
Nirav Karkera, head of research at Fisdom, sees the current market upswing as more of a relief rally. He believes the slowdown in corporate earnings growth—expected to last another quarter or two—is already priced in.
Even as he remained sceptical about the rally’s sustainability, Karkera admitted that valuation concerns have eased to some extent, injecting a dose of confidence into the market.
Another factor driving the recovery could be FIIs closing their short positions as the dollar tumbled to a three-month low, some market participants said. The Bloomberg Dollar Spot Index fell 0.6% on Wednesday to its weakest level since 9 December. This drop comes at a time when there are lingering concerns about the negative impact of US tariffs on the economy.
Also, market chatter about a potential cut in capital gains and securities transaction tax has sparked optimism, giving investors an extra reason to cheer.
While market corrections are a natural part of the cycle, Vikas Khemani, founder of Carnelian Asset Management and Advisors, said that markets always recover amid scepticism.
According to Khemani, fear has gripped investors—those who once bought on dips are now selling on rallies. As a result, he believes recovery might take a couple of months, and before that, we could see redemptions.
A glimmer of recovery could be emerging as earnings upgrades start to trickle in.
As per a JM Financial report dated 5 March, in February 2025, 12 Nifty 50 companies that make up 24% of the index, saw an upgrade in FY26 earnings per share (EPS) estimates. This included insurance (where 1 of 2 Nifty 50 companies saw EPS upgrades), metals & mining (2 of 5 companies), and utilities (1 of 2 companies), the report highlighted.
Meanwhile, Chris Wood, global head of equity strategy at Jefferies, believes that a risk of further correction continues. The real concern is that if the market does not rebound within three months, investors could start seeing year-on-year losses in their portfolios and that would be a bigger risk, he told Mint in a recent interaction.
While India has already experienced a substantial correction that contributed to the slowdown, he sees the bigger threat now looming from external forces—particularly the US.
Another critical variable? The dollar. He expects a peaking of the dollar. “But if I am wrong on the dollar, it’s going to be more negative not just for Indian equities but for all emerging markets,” he said.
