Nifty 50 jumps over 6% in March, breaking its longest losing streak since inception— what drove the rally? Explained

Indian stock market benchmark Nifty 50 is on track to end its longest monthly losing streak since its inception in 1996. The index rebounded over 6 per cent in March after five consecutive months of decline.

Nifty 50 reached a new peak of 26,277.35 on September 27. Then, it hit a downward spiral, plunging 14 per cent from October to February due to heavy foreign capital outflow amid stretched valuations, weak earnings, and slowing economic growth.

The domestic market is showing remarkable resilience despite heightened uncertainty over US President Donald Trump's aggressive tariff policies.

What is driving this rally in the Indian stock market?

5 key factors behind the Indian stock market's rally in March

1. Valuation comfort

A sharp correction in the Indian stock market pulled several stocks down by 30-40%, easing valuation concerns and sparking bottom-fishing by investors.

"The recent correction has brought down the one-year forward PE (price-to-earnings) from 21.3 times in September 2024 (above 10-year mean + 1SD, 20 times and slightly below +2SD, 21.8 times) to 18.1 times by February 2025 end (below 10-year mean, 18.2 times), resulting in a total PE correction of 17.6 per cent from its peak," Mirae Asset Capital Markets observed.

2. Improving macro indicators

Improving macroeconomic indicators also influenced market sentiment. India's retail inflation eased to a seven-month low of 3.61 per cent in February and industrial output growth picked up in January after slowing down in December. The Index of Industrial Production (IIP) grew by 5 per cent in January, up from 3.2 per cent in the previous month.

Morgan Stanley in its recent report predicted the Indian economy will be the third-largest in the world by 2028. It projected the Indian economy to grow from $3.5 trillion to $4.7 trillion in 2026, making it the fourth largest in the world behind the US, China, and Germany.

3. Rate cut hopes

Easing inflation in the US and India has fuelled hopes that the US Federal Reserve and Reserve Bank of India (RBI) will continue trimming interest rates this year.

In its last meeting, the Fed projected the possibility of two rate cuts this year. The RBI trimmed rates in February, and experts believe it will reduce rates again in April.

Rate cut hopes have been key drivers behind the market rally this month.

4. Foreign investors start buying

Foreign portfolio investors (FPIs) have turned net buyers of Indian stocks for this month in the cash segment. Till March 27, FPIs have lapped up Indian stock worth ₹6,367 crore in March.

"The market’s resilience, despite Trump’s reciprocal tariff threats, comes from the renewed buying by FPIs and the confidence this has given to the bulls," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.

5. Hopes of earnings revival

The market is discounting the possibility of earnings from Q1FY26 amid economic growth picking pace.

"We believe corporate earnings growth may pick up very well in FY26 from a low base of FY25. Q4FY25 trends are likely to be better than those of Q3FY25. FY26 is likely to be a higher growth year relative to FY25," Chandraprakash Padiyar, Senior Fund Manager at Tata Asset Management, told Mint.

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