Direct Equities: Relief rally amid consolidation

Following a sharp correction in February, markets remain in consolidation mode, with large-cap valuations normalizing while mid and small caps appear expensive. The newsletter explores key macroeconomic factors, global trade uncertainties—especially the impact of Trump’s tariff policies—and their influence on Indian equities. It also outlines sectoral opportunities and strategic investment approaches, helping investors navigate the evolving market landscape.

Highlights

• The Nifty-50 remains in consolidation, with valuations now neutral. An oversold market may see a short-term relief rally, but selectivity is advised amid ongoing global uncertainties, including Trump’s tariff policies.
• Indian equities faced a sharp correction in February, with Nifty-50 down 6% and mid/small caps declining 11%/13%. FIIs recorded significant outflows, while domestic investors remained net buyers.
• Large-cap valuations have normalized, while mid/small caps still appear pricey. Earnings growth for Nifty-50/BSE-500 is projected at ~7-8% for FY25, improving to mid-teens CAGR over FY25-27.
• Market sentiment will be shaped by US trade policies, inflation data, FII flows, crude oil prices, and the upcoming Q4 FY25 earnings season.