India’s Growth Engine Fires on All Cylinders 🚄

Last week, we advised accumulating stocks for the long term amid geopolitical concerns, highlighting how markets have historically rebounded from such uncertainties. As predicted, both benchmark and broader indices recovered sharply, delivering one of the strongest weekly performances.

For the week ending 16 May 2025, Indian markets were driven by positive domestic economic indicators, global cues, and renewed FII inflows. After initial declines and volatility, indices surged, supported by favourable US inflation data, the RBI’s accommodative stance, and strong earnings in auto, banking, and real estate. Mid and Small Cap indices outperformed.

By week’s end, the Nifty was up 4.2% and the Sensex gained 2,875 points, underscoring the market’s resilience.

Market Performance

Here's how the major indices fared:

Index	May 9, 2025	May 16, 2025	% Change
Nifty	24,008.0	25,109.8	4.2
Bank Nifty	53,595.4	55,354.9	3.3
Midcap Nifty	53,223,4	57,060.5	7.2

Sector Performance

Indian markets rallied strongly last week, with all sectors ending higher.

Defense (+17%), Capital Market (+11.5%), and Realty (+10.78%) led the gains on policy optimism and strong demand, while Metals (+9.28%) and Media (+9.11%) benefited from global trends and rising ad revenues.

Energy, Midcaps, Auto, IT, and PSU Banks also advanced on easing crude prices, moderating inflation, and solid earnings.

The rally was underpinned by easing geopolitical tensions, hopes for a US-India trade deal, and lower CPI inflation at 3.2%. Bullish technicals and renewed investor confidence added to the market’s broad-based strength.

Indices	Weekly Change (%)
Nifty Realty	10.78
Nifty Metal	9.28
Nifty Media	9.11
Nifty Energy	6.98
Nifty Select Midcap	6.57
Nifty Auto	5.86
Nifty IT	5.83
Nifty PSU Bank	5.78
Nifty Financial Services	3.81
Nifty Bank	3.28
Nifty Pharma	2.66
Nifty FMCG	2.57

Weekly Top Gainers (Nifty 500)

Company	Weekly Gain (%)
GRSE	38.3
Cochin Shipyard	37.1
Apar Industries	35.1
Eclerx Services	34.8
Kirloskar Oil Engine	33.7

Weekly Top Losers (Nifty 500)

Company	Weekly Loss (%)
Neuland Lab	-11.1
KPR Mill	-9.9
Chambal Fertilizer	-8.9
Vijaya Diagnostic	-8.4
Navin Flourine	-7.7

Defense and engineering stocks like Garden Reach Shipbuilders (+38.26%) and Cochin Shipyard (+37.11%) surged on robust order inflows and renewed government focus on defence and infrastructure spending.

Top losers such as Neuland Lab (-11.05%) and KPR Mill (-9.98%) declined due to sector-specific headwinds and weaker quarterly results impacting investor sentiment.

Liquidity Conditions

India’s CPI inflation decelerated further to 3.2 percent in April 2025 with continued moderation in food prices. With a benign outlook for inflation, one can expect a rate cut of another 50 bps by the end of FY26.

Low crude oil price, expected good monsoon, RBI rate cut and lower inflation are some of the positive macro factors for the Indian economy.

The increase in FII inflows demonstrates positive sentiment for India, possibly reflecting conviction among investors that India is a relatively better market, in the light of global growth challenges.

India Equity - Institutional Funds Flow (in Rs. crore)

Date	FII	FII (Futures)	DII
May 12, 2025	1,246	8,286	1,448
May 13, 2025	-477	13,909	4,274
May 14, 2025	932	438	316
May 15, 2025	5,393	10,792	-1,668
May 16, 2025	8,831	-4,186	5,187
Total	15,925	29,239	9,557

Relief Rallies and Renewed Optimism

This past week, global equities extended their relief rally as the US moved to scale back tariffs following key trade agreements with the UK and China, a decisive turn that injected fresh optimism into markets worldwide.

Indian equities stood out among the major gainers, with the Sensex climbing over 1,200 points and the Nifty breaching the 25,000 mark.

US indices led the charge, as the S&P 500 advanced 5.3%, the Nasdaq soared 7.2%, and the Dow rose 3.4%, propelled by softer inflation data, robust corporate earnings, and the prospect of renewed global growth.

European and Asian markets followed suit, buoyed by the prospect of lower tariffs and positive economic signals - FTSE 100 and Nikkei 225 gained 1.44% and 2.24%, while Kospi, Hang Seng, and Shanghai rose 1.65%, 2.66%, and 0.89% respectively.

Despite lingering volatility from ongoing tensions in the Middle East and Eastern Europe, resilient risk appetite and lower interest rates continued to favour equities over bonds, reinforcing the market’s upward momentum.

In summary, a confluence of easing trade frictions, improving macroeconomic data, and robust earnings has reignited global risk sentiment, with Indian markets well-positioned to benefit from this renewed global optimism.

Technical Perspective

We are of the view that, in the short-term, the market texture is bullish, but buying on dips and selling on rallies would be the ideal strategy for traders.

On the downside, 24,665/81300 and 24,400/80500 or 20 day SMA (Simple Moving Average) would act as key support levels, while 25,100/82700 could serve as an immediate resistance zone for the bulls.

A successful breakout above these levels could push the market toward 25,500/83800. However, if the index falls below 24,400/80500, the uptrend could become vulnerable.

For Bank Nifty, the higher bottom support is placed near 54,400. As long as it is trading above this level, the positive momentum is likely to continue. On the higher side, it could retest the level of 56,000. Further upside may also continue, potentially lifting the index to 56,500.

India’s Growth Engine Fires on All Cylinders

India’s recent earnings season has delivered encouraging results, with more than half of Nifty 50 companies beating or meeting expectations-demonstrating broad-based corporate strength.

This comes as inflation continues to cool, with headline CPI dropping to 3.16% in April and food inflation easing to just 1.78%, supporting both consumer sentiment and policy flexibility.

Simultaneously, external commercial borrowings hit a 72-month high at US$ 11 billion in March (with US$ 4.5 billion from financials), and annual ECB proposals surged 26% to a record US$ 61.8 billion.

This influx of global capital is poised to fuel NBFC growth and market momentum, reinforcing the positive outlook for India’s economy as we enter the new fiscal year.cautious

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