Markets end FY25 with 5% gains but investors wary of tariffs; H2 may be better

The current unease over the market outlook aside, money managers and analysts believe India's stock benchmarks will log gains in the second part of the fiscal year, with a likely rebound in local corporate earnings potentially encouraging foreign investors to return to D-Street. In the financial year that ended March 31, the Sensex and Nifty advanced around 5% each after posting gains of 28% in the previous fiscal. Both the indices, which were on a record-breaking run until the last week of September, gave up most of the gains following seemingly unrelenting sales by foreign institutions.

FPI Selloff Loses Steam
The sell-off through the second half of the financial year also took a toll on broader market. For the full fiscal year, the Nifty Mid-cap 150 index rose 5.7%, and the Small-cap 250 gained 2.3%.
The second-half losses would have been sharper, but for aggressive purchases from domestic institutions, mainly mutual funds, armed with record monthly flows for most of the financial year, and a 10-day rebound in March. Whether the recovery continues in the new financial year would depend on Trump's tariff policy, and whether foreign investors' renewed interest in India continues.

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The reciprocal tariffs kick off on April 2.

«What is bogging down investors right now is the uncertainty about foreign flows and Donald Trump's policy on India,» said Nilesh Shah, MD, Kotak Mutual Fund.

Since the sell-off that began late in September last year, foreign investors have dumped shares worth ₹2.81 lakh crore