5 factors that signal India could join the global market rally

medium118834064Dalal Street, which gave investors bragging rights for reaping high returns in the past, is now grappling with a sobering reality. Remember that friend who once talked about a glittering future owing to his well-thought-of investments? He now stares at a portfolio full of red marks.Since October, Indian indices have been on a downward spiral, shedding more than 15% from their peaks. It’s not just blue-chip giants, the pain is widespread — small- and mid-cap stocks are down more than 22%.The allure of the Indian market for foreign investors has taken a hit. Foreign institutional investors (FIIs), once the lifeblood of the Indian market, have so far pulled out more than ₹1.5 lakh crore in 2025.When evaluating potential returns, global benchmarks are paramount. In 2024, India’s stock market yielded a modest 8%, a stark contrast to the robust performances seen elsewhere in the world. The US market surged with a 23% return. European markets gave returns ranging from 7% to 18%, while West Asia led the pack with a remarkable 26% return. Even established Asian markets like Japan and Hong Kong offered returns between 15% and 19%. This raises concerns about India’s comparative competitiveness.However, after hitting a low of 21,964 levels, the Nifty 50 has staged a modest 3% recovery in the past four trading sessions.Clearly, the market is at a crucial juncture, as it pauses the rally below the 20-period exponential moving average (EMA) — a key indicator for short-term trends. Whether this rebound represents a temporary pause before further declines or a solid base for a fresh uptrend is the key question on everyone’s mind. But there are five factors that make one optimistic despite the threat of Trump tariffs:Stable macrosRenewed growth focusRBI’s liquidity supportEasing dollarEasing US bond yieldsOn the technical front, the Nifty has formed a high wave candle maintaining a higher high and higher low, indicating the continuation of the pullback for the fourth session in a row. The index sustaining above March 7’s low (22,464) will keep the current pullback intact and will lead to extension of the pullback towards 22,800-23,000 levels in the coming sessions. The only hurdle is that the 20-period EMA is currently placed at 22,690 levels.“The latest gains come as global market sentiment improved, driven by US President Donald Trump’s softened stance on tariffs for Canadian and Mexican automakers. Additionally, signs of recovery in the Chinese economy provided a much-needed lift to metal stocks, while declining crude oil prices further boosted investor confidence. Despite ongoing trade tensions with the US, Beijing set an ambitious 5% growth target for 2025, reinforcing optimism about global economic stability. This positive outlook fuelled a 2.3% surge in Nifty Metals, reflecting strong investor confidence,” says Sundar Kewat, technical and derivatives analyst at Ashika Institutional Equity.There was a strong reason to believe that Trump feared a stock market downturn so much so that he would scale back some of his more extreme policies, especially broad tariffs that could erode corporate profits and unsettle investors. Several analysts believe that Trump views the stock market as a direct measure of his success and will deeply oppose any action that might send prices tumbling.The positivesHere are five reasons why Indian markets should put up a good show going forward:1. Stable macrosIndia is on a solid wicket on the macro front, with two of its biggest macro concerns, fiscal deficit and current account deficit, under control and inflation easing. In its latest Article IV consultation report on India, released on February 27, the International Monetary Fund (IMF) stressed the stability on the macro front while highlighting downside risks such as volatile oil prices (we will come to this in a bit) and geoeconomic fragmentation affecting external demand.“Despite recent moderation, India’s economic growth has remained robust, with GDP growth of 6% year-on-year in the first half of 2024/25. Inflation has broadly declined within the tolerance band, though food price fluctuations have created some volatility. The financial sector has remained resilient, with non-performing loans at multi-year lows. Fiscal consolidation has continued, and the current account deficit has remained well contained, supported by strong growth in service exports,” the IMF noted. medium1188340352. Renewed growth focusThe government and the Reserve Bank of India (RBI) have recently worked in tandem to regain the lost growth momentum. The government announced tax cuts worth ₹1 lakh crore in the Union Budget last month to boost consumption. Recent appointments of regulatory heads at the RBI and the Securities and Exchange Board of India (Sebi) are seen as an attempt to bring in pro-growth policies. New Sebi chairman Tuhin Kanta Pandey has expressed his willingness to engage with foreign investors to address their concerns.“We at Sebi are conscious about the need to create a conducive environment to attract foreign capital. We will be happy to engage with FPI (foreign portfolio investors) and AIF (alternative investment fund) industry participants to address their difficulties and further rationalise regulations to promote ease of operation,” he said at a recent event.3. RBI’s liquidity supportThe RBI under governor Sanjay Malhotra has already delivered its first rate cut alongside a series of steps to inject liquidity into the markets and ease regulations. Analysts are expecting another rate cut when the monetary policy committee (MPC) of the central bank meets early next month. On March 5, the RBI announced ₹1 lakh crore bond purchases in two tranches, and a dollar/rupee buy/sell swap auction of $10bn for three years. This was the third package of measures aimed at boosting durable liquidity in the markets that would enable the transmission of lower policy rates in the market.4 and 5. Easing dollar and US bond yieldsTwo of the biggest constraints on foreign capital flows into emerging markets have eased in recent weeks. The dollar index (DXY) has fallen over 5% in the past month. DXY has fallen below the 20-day and 20-week EMA — an indication that the dollar has become bearish despite the noise around tariffs. Yields on 10-year US bonds have also eased from a peak of 4.8% in January to around 4.3% now. This indicates the market is expecting lower borrowing costs. Both these factors bode well for Indian markets. medium nocaptionhttp://youtu.be/ggiOqgLS9eA?si=DY2gUUGQzLwoqUJJThe crude oil factorSince Trump assumed office, global crude oil prices have fallen more than 5% and are trading below $70 per barrel. This signals not just market dynamics, but also a deliberate push towards lowering energy prices.From the oil fields of Texas to the shale basins of North Dakota, the US has long been blessed with abundant energy reserves. Recognising this potential, the Trump administration has taken bold steps to streamline regulations and encourage a further increase in domestic production.Global oil prices plunged to their lowest point since 2021 after Saudi Arabia and Opec+ unexpectedly announced a production increase, despite prior signals of potential future boosts. This decision, amid escalating trade tensions between the US and other countries, caught the markets off guard.Adding to the uncertainty, the US crude oil inventories surged by 3.6mn barrels in late February, signalling potentially weakening demand, according to the Energy Information Administration. The impact of the Trump administration’s energy policies further clouds the outlook. While tighter sanctions on Iran and Venezuela could constrain supply, deregulation in the US and potential easing of restrictions on Russian energy, aimed at facilitating a Ukraine ceasefire, could significantly increase it. Opec+ plans to gradually add 2.2mn barrels per day, roughly 2% of global supply, through 2026, but reserves the right to adjust its strategy based on market conditions.In any case, lower oil prices bode well for the Indian markets and macroeconomic stability. It eases the oil import bill, helps in combating domestic inflation and keeps the current account deficit benign.The last wordWhile downside risks remain, the recent correction in the Indian market has eased valuations from peak levels.This, when combined with the five factors mentioned earlier, could stem FII selling in India.The modest recovery in Nifty 50 last week (2.8%+) looks more like a pointer towards the Indian market joining the global bull rally rather than just being a momentary bounce back.