Outlook for the Month of Mar’25

Economy Review

The key events in the month were –

1. Domestic Factors –

a) GDP – GDP growth in Q3FY25 came in at 6.2% while GVA growth was at 6.2%. GDP growth has rebounded after the weak Q2FY25 print of 5.4% (now revised to 5.6%).

b) GST Collection – GST collection in Feb’25 was Rs 1.8 tn, up 9.1% yoy.

c) Core Infra Sector – Core infrastructure industries growth stood at 4.6%YoY in Jan’25 marginally lower from 4.8% in Dec’24. Electricity production slowed to 1.3% YoY during the month from 6.2% in Dec’24.

d) Fiscal Deficit – The fiscal deficit stood at 74.5% of RE in FY25 (Apr-Jan) vs 63.6% in FY24YTD mainly on account of slower growth in net tax collections due to higher transfers to states. Capital expenditure was up 5%YoY FY25YTD while revenue expenditure was up 6.8%YoY. Total expenditure was up 6.4%YoY.

2. Global Factors –

a) Tariff War – As negotiating tactics for tariff equalization, Trump has announced that his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, citing the continued flow of drugs into the US from those countries. Trump also confirmed that an additional 10% duty on Chinese goods will be imposed on the same day, on top of the 10% tariff already introduced on 4 February.

b) Eurozone PMI – Eurozone Manufacturing remained below the 50 mark in Jan’25, indicating contraction. However, Services PMI continued to expand and stood at 51.3 during the month.

c) Crude Oil – Brent crude oil prices remained weak and stood at $74/bbl during the month led by rising concerns on global demand.

Domestic Macro Economic Data

Inflation – India’s CPI Inflation in January’25 moderated to 4.3% vs. 5.2% in December’24 led by lower food prices while core inflation remained steady. India’s WPI inflation marginally eased to 2.4% in January’24 from 2.4% in December’24.

Outlook for Equities
The Nifty Index declined 1.7%, while the broader markets underperformed massively, with midcaps falling 2.3% and small caps falling 3% in the past week. Most major sectors ended the week with negative returns. Market sentiments were further impacted by weak economic data in the US, increasing tariff risks on the global economy, and concerns around the cyclical softness in the domestic economy.

Trump has announced that his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, citing the continued flow of drugs into the US from those countries. Trump also confirmed that an additional 10% duty on Chinese goods will be imposed on the same day, on top of the 10% tariff already introduced on 4 February. Brent crude oil prices remained weak and stood at $74/bbl during the month led by rising concerns on global demand. On the domestic front, GDP growth in Q3FY25 came in at 6.2% while GVA growth was at 6.2%. GDP growth has rebounded after the weak Q2FY25 print of 5.4% (now revised to 5.6%). GST collection in Feb’25 was Rs 1.8 tn, up 9.1% yoy. The fiscal deficit stood at 74.5% of RE in FY25 (Apr-Jan) vs 63.6% in FY24YTD mainly on account of slower growth in net tax collections due to higher transfers to states. Capital expenditure was up 5%YoY FY25YTD while revenue expenditure was up 6.8%YoY. Total expenditure was up 6.4%YoY. We expect an economic revival to play out in the second half of this calendar year, led by the rural segment, and stress in the lower end of the pyramid easing. FIIs sold equities worth $4.0bn in the month of Feb’25 while DIIs remained strong buyers to the tune of $7.4bn.

We expect Nifty earnings to grow at ~12-13% CAGR over the medium term. Nifty is currently trading at ~19x FY26e P/E and valuations have turned attractive. We expect some shift towards consumption based sectors from capex in the near term. Investors can continue to invest in equities from a medium to long-term perspective.

Outlook for Debt

RBI MPC cut repo rate by 25 bps in February MPC to 6.25% and projected a balanced tone in the discourse. Governor pointed out that MPC remains less restrictive for this policy and future decisions will be made on basis of assessment of changing situation and landscape. For growth forecast even though projections are at the higher end of the range for FY26 Governor did mention that uncertainties have led to postponement of consumption. On liquidity RBI remained firm on the objective to provide as required by the market. Above lead to conclusion that excess liquidity might not be the norm anytime soon and RBI might wait for actual data before they sound overly concerned on growth. Inflation forecast for FY26 augurs well for future easing. On real rates Governor refrained from making a forecast and stated the current real rate as 1.50%.

MPC minutes noted that the inflation trajectory has turned favourable, though growth in 2HFY25 was expected to remain slower than that of last year, making it opportune for a rate cut. All the MPC members expressed concern about the slowdown in the real GDP growth. They agreed that an easing monetary stance would complement the tax cuts in the FY2026 Union Budget to support growth. External members noted the subsequent downward revision of the RBI’s growth forecast for FY2025. MPC members noted that food inflation is gradually subsiding. Minutes tilted towards a dovish thought process.

RBI Rate-cut announcements have been complemented by liquidity measures in the form of OMO purchases, FX buy/sell swaps, along with other liquidity management measures. The RBI also conducted a three-year US$10 bn buy/sell swap to further ease liquidity conditions. System liquidity conditions however still remain in deficit mode as aggressive FX intervention and rise in currency in circulation have continued to drain rupee liquidity. FPI inflows in debt picked up in February totalling to $1.20 bn in the month.

3QFY25 GDP growth was at 6.2% along with GVA growth at 6.2%. GDP growth was led by government consumption growth and private consumption growth. CPI inflation in January softened to 4.3% due to a moderation in food prices. Headline CPI fell led by a sharp fall in vegetable prices, eggs, pulses, spices, oils and fats. Core inflation inched up to 3.7% driven by a rise in personal effects, housing, gold, silver and ornaments all saw a sequential increase. WPI inflation for January was at 2.3% yoy. IIP growth in December moderated to 3.2% all categories registered positive growth, led by capital goods and consumer durables barring consumer non-durables, which contracted. Goods trade deficit in January widened to US$23 bn from US$21.9 in December. The services trade surplus in January was at US$20.3 bn on the back of US$19.1 bn in December which was revised up sharply.

FOMC minutes indicated dialogue on need for reduction of quantitative tightening which has led to chatter in the market on these accounts. Weaker retail sales and lower consumer confidence data led to a rally in US yields which declined by 35 bps in February to 4.20%. Geopolitical tensions and talks of reciprocal tariffs kept Gold well bid while dollar index declined from its highs as materialisation of tariff talks was lower. Brent prices remained range bound and ended the month near $73/bbl.


Markets in the near term await further announcement of RBI OMO purchases, liquidity measures by the central bank, and currency movements. Globally narrative on tariffs and consequent impact on currencies and inflation will be watched. Commentary from Fed members and global central banks actions will be watched as well as movements in oil prices. Benchmark 10-year gsec closed at 6.72% on February 28, 2024 higher by 3 bps during the month. 10-year gsec yield is likely to be in a range of 6.60%-6.80% in the near term. Spread of 10 year Gsec with corporate bonds is 55 bps and likely to remain between 55-65 bps.