Indian equity markets tumbled in March, mirroring a broad global sell-off and a sharp spike in crude oil prices, as risk aversion intensified and foreign investors pulled out heavily, according to a report by Motilal Oswal Mutual Fund.
The report highlighted a synchronised downturn across large-cap and broader indices, with the Nifty 50 falling 11.31 per cent during the month and the Nifty Next 50 dropping 13.43 per cent. Mid-cap and small-cap indices also declined by 11.06 per cent and 10.03 per cent, respectively, reflecting widespread selling pressure across segments.
The weakness in Indian equities came against the backdrop of a global market decline, with major US indices also under pressure. The S&P 500 fell 7.78 per cent, while the Nasdaq 100 dropped 8.04 per cent in March. The Dow Jones Industrial Average recorded a relatively smaller decline of 7.68 per cent.
Motilal Oswal Mutual Fund said global growth concerns and heightened volatility weighed on investor sentiment, pushing markets into a risk-off mode. Developed markets were not spared, with Germany declining 13.26 per cent and Japan falling 12.16 per cent, while the United Kingdom proved relatively resilient with a decline of 8.64 per cent.
Emerging markets showed mixed performance, with China and Brazil seeing comparatively modest declines, while South Africa and Korea fell sharply by over 20 per cent each.
Oil Surge Adds To Market Stress
One of the most striking developments during the month was the surge in crude oil prices, which rose 53.51 per cent. The report attributed this to tightening supply conditions and market volatility, which added to inflationary concerns globally.
At the same time, the US dollar strengthened by 4.26 per cent against the rupee, further tightening financial conditions for emerging markets like India.
Precious metals, however, moved in the opposite direction. Gold prices fell 13.27 per cent, while silver declined 21.37 per cent, reflecting weaker demand expectations amid volatile market conditions.
Within Indian equities, sectoral performance was largely negative, with rate-sensitive and consumption-linked sectors bearing the brunt of the sell-off.
The banking sector declined 16.94 per cent, while auto stocks fell 15.59 per cent and realty dropped 16.58 per cent. Fast-moving consumer goods (FMCG) also saw significant pressure, falling 10.96 per cent.
Information technology stocks proved relatively resilient, declining only 5.04 per cent, while healthcare stocks fell 4.51 per cent, making them among the least affected sectors.
The broader Nifty 500 index declined 11.39 per cent during the month, dragged down primarily by financial services, consumer discretionary and industrial stocks.
Factor Indices Also Under Pressure
The downturn extended to factor-based indices, indicating that the sell-off was broad-based rather than concentrated in specific investment styles.
The Quality index fell 8.11 per cent, while the low volatility and momentum indices declined 10.82 per cent and 12.17 per cent, respectively. The Enhanced Value index saw the steepest fall among factor strategies, dropping 16.90 per cent.
A key driver of the market weakness was the sharp reversal in foreign investor sentiment. Foreign institutional investors (FIIs) recorded outflows of Rs 1,25,736 crore in March, compared to inflows of Rs 37,804 crore in the previous period.
Domestic institutional investors (DIIs) also remained in outflow territory, with net outflows of Rs 91,511 crore, compounding the pressure on equities.
Motilal Oswal Mutual Fund said the combined outflows underscored a significant shift in investor positioning amid global uncertainties.
Despite the sharp market correction, domestic economic indicators presented a mixed picture.
India’s GST collections rose to Rs 2,00,064 crore, indicating continued resilience in economic activity. However, inflation edged higher, with CPI inflation rising to 3.21 per cent from 2.75 per cent in the previous month, signalling a modest increase in price pressures.
The unemployment rate also ticked up to 7.00 per cent, compared with 6.70 per cent earlier, while the composite PMI eased to 56.50 from 59.30, suggesting some moderation in economic momentum.
The repo rate remained unchanged at 5.25 per cent, while the 10-year government bond yield rose to 7.00 per cent, reflecting tightening financial conditions.
Fixed Income Offers Relative Stability
In contrast to equities, fixed income markets showed relative stability.
The Nifty Liquid index returned 0.54 per cent for the month, while short-duration debt posted modest gains. However, long-duration debt indices declined by 2.51 per cent, reflecting sensitivity to rising yields.
Cryptocurrency markets showed relative resilience compared with traditional assets. Bitcoin rose 0.70 per cent, while Ethereum gained 3.45 per cent during the month.
However, both assets remained significantly lower over longer time horizons, reflecting continued volatility in the segment.
Motilal Oswal Mutual Fund cautioned that the current environment is marked by heightened uncertainty, with global growth concerns, inflation pressures and volatile commodity prices likely to influence market direction.
The report noted that past performance may not be sustained and should not be considered indicative of future returns, urging investors to remain cautious in the face of ongoing market turbulence.
Overall, the March data points to a synchronised global correction, with Indian markets deeply intertwined with global risk sentiment and capital flows, leaving the near-term outlook dependent on external developments as much as domestic fundamentals. |
