Outlook for the Month of April’25

Economy Review

The key events in the month were –

1. Domestic Factors –

a) Trade Deficit – India’s trade deficit for March’25 widened to $21.5bn, rising sharply from $14.1bn in February’25, primarily due to higher oil and gold imports.

b) IIP – IIP growth has eased to 4% in FY25 from 5.9% growth last year due to much slower growth across the board.

c) GST collection – GST collections surged by 12.6% to an all-time high of Rs 2.37bn in April’25.

d) Manufacturing PMI – India’s manufacturing PMI remains buoyant at 58.2 in April’25 Vs 58.1 last month.

e) IMD – IMD predicted above-normal monsoon rainfall this year, expected at 105% of the long-period average.

2. Global Factors –

a) Tariff War – Trump government announced a 90 day tariff pause for all countries except China. Trade negotiations are on given US trade deficit rose to a record high in March’25, while consumer confidence slipped to near 5-year low in April’25.

b) IMF – IMF slashed India's FY2026 GDP growth projection to 6.2%, down from its earlier estimate of 6.5%, citing growing global trade tensions and economic uncertainty.

c) Crude Oil – Brent crude oil prices corrected to $60/bbl during the month and remain benign at ~$63/bbl due global growth concerns.

Domestic Macro Economic Data

Inflation – India’s CPI Inflation in March’25 moderated to 3.3% Vs 3.6% in February’25 due by lower food prices. India’s WPI inflation softened to 2.1% in March’25 from 2.4% in February’25.

Outlook for Equities
Nifty surged 3.5% in April’25. Midcap and smallcap indices also saw moderate gains in the month of April of 4.7% and 2.2% respectively. Market sentiments was positive on Trump’s tariff pause, RBI’s second interest-rate cut and ongoing cash injections by RBI which wiped out a liquidity deficit in the financial system and FII’s growing optimism about India’s domestic demand and faster economic growth despite the global trade war.

Trump government announced a 90 day tariff pause for all countries except China. Trade negotiations are on with several countries on tariff reduction. Brent crude oil prices corrected sharply to $60/bbl during the month and remain benign at ~$63/bbl due global growth concerns. On the domestic front, India’s trade deficit for March’25 widened to $21.5bn, rising sharply from $14.1bn in February’25, primarily due to higher oil and gold imports. RBI reduced the repo rate by 25 bps to 6% and shifted its stance to accommodative. It also injected liquidity through OMO. Pahalgham attack heightened uncertainty relating to India-Pakistan tensions which weighed on investor sentiments. FIIs bought equities worth $1.3bn and DIIs bought $3.3bn of equities in the month of April’25.

We expect an economic revival to play out in the second half of this calendar year due to normal monsoon and consumption boost. We expect Nifty earnings to grow at ~12-13% CAGR over the medium term. Nifty is currently trading at ~19x FY27e P/E and valuations have turned attractive. Investors can continue to invest in equities from a medium to long-term perspective.

Outlook for Debt

RBI April’25 MPC was more dovish as compared to expectations. The RBI reduced repo rate by 25 bps to 6% and shifted its stance to accommodative. Focus areas were on addressing growth concerns while inflation remains comfortable. RBI also revised FY26 real GDP growth estimate to 6.5% lower by 20bps. Inflation forecasts were also lowered by 20bps to 4.0% for FY26. Food inflation to remain benign, given the broad-based seasonal correction in vegetable prices and robust crop production. Declining crude oil prices also contribute to a favourable inflation trajectory. In RBI MPC minutes it was observed that all MPC members unanimously expressed the need to support growth in an uncertain external environment, even as domestic conditions remain healthy. MPC members displayed confidence around inflation remaining well-behaved in the coming months and aligning durably to the RBI’s 4% inflation target.

RBI announced additional OMO purchases for the month of May’25 to the extent of Rs 1.25tn. This would take overall OMO purchases in the calendar year 2025 to Rs 5.3tn higher that Rs 5tn of OMO purchases done during covid. Banking system liquidity as well as durable liquidity have been positive since April’25 and with RBI’s measures system is likely to remain in surplus.

CPI inflation remained comfortable at 3.3% in March’25 with continued moderation in food prices. There was a sharp decline in prices of vegetables, eggs, pulses and spices. Core inflation inched up to 4.1% driven by a sharp increase in personal effects prices (mostly gold). WPI inflation for March’25 was at 2.0% YoY. IIP for March’25 recorded a growth of 3.0% YoY but showed only marginal expansion during the month indicating that industrial activity has remained subdued. The recent softness is likely attributable to sluggish exports. Goods trade deficit widened to $21.5 bn in March’25 from $14.1 bn in February’25. Imports in March’25 grew mainly due to a rise in oil imports. The services trade surplus in March’25 was at $17.9 bn after $17.1 bn in February’25.

In global markets ECB reduced interest rates by 25bps citing deteriorating growth outlook due rising trade tensions, while inflation trajectory remained favourable. BOJ kept policy rates stable while reducing the growth forecast. US 10 year declined during the month as initial reaction to trade related tensions and consequent inflation gave way to commentary on slower growth. From 4.59% during April’25 it eased as low as 4.12% towards end of the month. US GDP data for Q1FY26 showed contraction while dollar index fell below 100 during the month. Crude oil prices declined by 16% during the month towards $63/bbl as slower demand headlines kept prices under pressure.

Markets in the near term await resolution of border tensions, conclusion of negotiations on trade deals, oil prices, FPI flows and currency movements. Globally FOMC narrative and resolution of tariff talks will be watched along with measures from other countries. Benchmark 10 year Gsec closed at 6.36% on 30th April’25 lower by 22 bps during the month. 10 year Gsec yield is likely to be in a range of 6.25%-6.50% in the near term. Spread of 10 year Gsec with corporate bonds is 50 bps and likely to remain between 45-55 bps.