The Stockmarkets Pull Back Their Entire 2025 Losses
March 24, 2025 appears to be a turning point for both the stock and currency markets, being the day all losses have been recovered
On Episode 539 of The Core Report, financial journalist Govindraj Ethiraj talks to Garima Kapoor, Economist and Executive Vice President at Elara Securities (India) as well as Anindya Banerjee, Head of Research for Forex and Interest Rates at Kotak Securities.
SHOW NOTES
(00:00) Stories of the Day
(01:08) The stockmarkets pull back their entire 2025 losses
(04:43) The Rupee gains for ninth session, recovers 2025 losses
(05:49) Understanding the dramatic turnaround in the Rupee, the best performing Asian currency this month
(12:23) What is changing in the backdrop to the Indian economy that is changing the outlook as well?
(21:18) Private capital expenditure's share in the overall investments in the economy dipped to a decadal low of 33 per cent in FY24
(23:20) And the one area where the US may not impose tariffs - eggs (which are running out)
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Tuesday, the 25th of March, and this is Govind Rajathiraj, recorded and broadcasting and streaming from Mumbai, India's financial capital, our top stories and themes for the day. And it is a very interesting day, or was, which is March 24th, Monday, 2025.
The stock markets pull back all their losses of 2025.
The rupee too gains for a ninth session and recovers its 2025 losses.
Understanding the dramatic turnaround in the rupee, the best performing Asian currency this month.
What's changing in the backdrop to the Indian economy, that's changing the outlook as well.
Private capital expenditure share in overall investments in the economy has dropped to a decadal low of 33% in 2023-24.
And the one area where the United States may not impose tariffs, eggs, which are running out of stock.
The Turning Point
March 24th, 2025 appears to be a turning point for both the stock and currency markets, being all losses have been recovered. Will it stay and build from here? Well, let's see.
There have been several things going against the markets until the last few days. Two of them stand out. First is obviously foreign institutional investors who've been selling since September 2024, more than $16 billion at last count.
And the economy and the numbers, including of the corporate sector, where there have been visible signs of a growth slowdown in the last two quarters. The first is noticeably changed with FIs having turned net buyers in about three of the last four sessions. Interestingly, or incidentally, there is debt and equity buying that's happening at this point.
And second, the economy, which is evidently looking better, at least as seen through the eyes of economists who are focussing on the signals behind the signals. Or as our guest who will join us shortly says, India's economic policy backdrop is turning. And then why foreign portfolio investors are investing in Indian debt with our next guest.
Back to our markets on Monday, they reversed all the losses of 2025 following that six-day winning streak, thanks to both the return of foreign portfolio investors as well as some very heavy bottom fishing. The 30-stock Senzac climbed 1,078 points or 1.4% to close at 77,984, a whisker short of 78,000. The Nifty 50 was higher 307 points to close at 23,658.
Like in the last few days, the markets opened strong and stayed there and started climbing subsequently or in the second part of the trading day. Remember, the April 2nd deadline of tariffs in the United States is still looming. But there seems to be a discounting of Trump's threats, both on the Wall Street and Wall Street.
Partly, of course, because there are clear indications that there will be some flexibility, including by and from Donald Trump himself. And also that countries like India are working out deals going by the number of meetings and potential visits between the two countries. The Business Centre reported that the market capitalisation of listed companies on the National Stock Exchange has risen to about $4.8 trillion. The Nifty mid-cap and small-cap 100 indices were also higher by about a percent each on Monday. Back on Wall Street, CNBC reported overnight that stock futures jumped early Monday on reports that President Trump was planning to hold back some of the tariffs initially planned for April 2nd, raising hopes the U.S. won't plunge the globe into all-out trade wars. The Wall Street Journal, meanwhile, reported that the tariffs are expected to be narrow in scope and will likely exclude some industry-specific duties like cars and chips.
Trump may also exclude some nations from the tariffs, according to Bloomberg News. While all this is fluid, the suggestion of flexibility is sufficient to help everyone take those desperately needed breaths. Both the Wall Street Journal and Bloomberg News reports noted that the situation remains fluid, as we know very well, and that plans could change.
There are some other nuances to the U.S. markets, including triggers from the economy itself, which could be weak, and interest rates which could fall, and the growing belief that tariffs, at least in the eyes of the Federal Reserve, will be transitionary. And back home, it's been a tough year for mutual funds this year. A report in the Economic Times says equity mutual funds have lost up to 21 percent in the current calendar year so far.
Of the 279 funds in this period that they tracked, 278 have offered negative returns in the same. In other words, only one scheme has managed to deliver positive returns for calendar 2025. On the other hand, of course, mutual funds are not something that you measure in such short time periods, and that perhaps is the moral of the story.
The Rupee Pulls Back
The rupee, like the markets, has pulled back its losses in 2025. It was up for the ninth consecutive session on Monday, the longest winning streak since January 2024, thanks to those stepped-up foreign inflows and a weak U.S. dollar. The rupee closed at Rs.
85.63 against the dollar, up about 0.4 percent for the day, according to Reuters, which added that the nine-day streak has boosted the rupee as the currency benefited from dollar inflows related to inter-company borrowings and repatriation of corporate profits, which is usual in March, and more on that shortly. On the other hand, some $3 billion has flowed into Indian bonds in the month of March so far. The rupee's appreciation in March has tracked a fall in the dollar index, according to Business Standard, and the dollar index had weakened by about 3.3 percent in March, which is the highest since November 2022. The sharp gain in the rupee also likely took exporters by surprise, and more shortly, prompted dollar sales and adding to that momentum, according to traders who spoke to Reuters, also adding that the rupee had now outpaced all its major Asian peers. I reached out to Anindya Banerjee, Head of Research for Foreign Exchange and Interest Rates with Kotak Securities, and I began by asking him how he was reading not just the rise in the rupee, but the sudden and almost dramatic jump in its value against the dollar in recent days.
INTERVIEW TRANSCRIPT
Anindya Banerjee: This has a combination of global and seasonal factors. Global means that if you look at the US dollar index, since I would say early Feb till the bottom it made last week, it was a move of almost 7%. So the dollar index depreciated by 7%.
Rupee had to play a catch-up. Second, if you look at the FPI flows in the Indian market, so if we segregate that into equity and debt, equity has seen less of selling over the one week or 10 days, and debt at the same time has seen a remarkable increase in investment. So that's factor number two.
Factor number three, this is the financial year-end, and we tend to see a lot of selling from corporates, especially the exporters. So what happened was that when the Indian rupee was depreciating against the US dollar and it was around 88 levels, the market was expecting it to keep on depreciating and head towards the level of 90. So a lot of the exporters had not hedged because the overall forward premia is not that enticing enough.
And that's the reason why when it's reversed, now we are seeing a lot of exporters coming into the market and doing bank selling. So all these three factors have contributed.
Govindraj Ethiraj: You talked about the dollar, and I'll come to that in a second, but the rupee has also been amongst, if not the best performing in emerging markets in the last month. So what explains that? Because the dollar weakness, of course, is keeping everyone stronger.
Anindya Banerjee: Right. So if we look at a slightly larger time frame, in the early part of November, let's say around the first week of November, we were around 84. Then we went to 88.
So we suddenly came from one of the strongest currencies to one of the weakest currencies in just two to three months. Now what has happened is it has tried to play a sort of a retracement move. So from 84 to 88 and back to 85.5. Yes, if you compare the Indian rupees performance over a month's time frame, we are the best performer. But if you take a quarter's time frame, we are doing around the average.
Govindraj Ethiraj: We're recovering lost ground. And the dollar itself, which is, of course, weak because of reasons back home and uncertainty around business, around tariffs, and so on. Are you able to see any other trends in the way the dollar is moving?
Anindya Banerjee: What has happened was that initially the market was taken on the wrong foot when Trump went with the tariff hike against Canada and Mexico. But the flip-flop from Trump, which he did quite a number of times in the first term, actually led to a situation where they started to trim their risk premia in the market. So that's the reason why we saw a lot of the long positions in the dollar get unwound.
So it's more of trying to price in the worst and things don't turn up as per expectation. So they start to trim down the bets. So that was the overall situation in the dollar index.
Yes, the uncertainty around the U.S. economy, because what Trump is or the Trump administration is pursuing, that is America First policy, will be negative for the U.S. economy over the medium term, which means GDP growth will come under heavy pressure because he is also trying to talk about cutting down government expenditure. And now if you trim down the government expenditure significantly, it will have a negative impact on growth. And that's the reason why that has also played on the U.S. dollar. That has also played on the U.S. bond yields, because if you look at the 10-year yields or the 30-year yields, they have come off quite a bit because now the market is anticipating that the Fed may cut rates twice this year. So all of these things have played their role to bring the dollar index down.
Govindraj Ethiraj: You know, if I were to go back to the point that you made earlier about equity and debt investments from foreign portfolio investors, now they do, of course, operate slightly differently as equity and debt investors don't necessarily work on the same clock. What is driving debt investments right now at the level that we're seeing and versus equity, let's say, which has definitely come back after a long gap, but it's still stable?
Anindya Banerjee: See, actually, there are three factors. First is that the overall inflation in India continues to be lower. Second, the liquidity situation has improved quite a bit over the past few weeks because of the measures which RBI has taken with the OMOs as well as with the swaps, the FX swaps.
So that is factor number three. And third, as I said in the last question, that the U.S. bond yields have come down quite a bit because that helps in the interest rate differential. So all these three factors have contributed to the fall in the Indian economy that has brought in the FDI flows into the market.
Govindraj Ethiraj: Right. So how's your outlook for the next few weeks or months in India?
Anindya Banerjee: So USD and R, see, over the month of March and April, it tends to do well because of the seasonality. But as we look beyond the next two months, I think globally, the trade war is far from over because the Trump administration is very serious about the America First policy this time. And that means you can't have an America first policy and globalisation or let's say an open trade between China and America.
So which means that in the coming months and quarters, we will see the trade war intensify between China and America. And when that, the emerging market currencies can come under pressure. So this appreciation in the Indian rupee may sustain for a few weeks.
But if I look into the next few months and quarters, we could again see the Indian rupee depreciate.
Govindraj Ethiraj: Thank you so much for joining me.
Real Estate Is Weak
Housing sales across India's top nine cities have dropped 23% in the Jan to March quarter over last year, thanks to high prices and a slowing economy, which is making buyers cautious, according to a report by real estate data firm Prop Equity quoted by Bloomberg. Only Bangalore and the national capital region that includes Delhi defied the downward trend with a 10% increase. Hyderabad saw the steepest decline with sales nearly halving during the quarter, while numbers for Mumbai and Pune fell by a third.
Poor demand has led to a 34% in new project launches across these nine cities. And the correction comes after three years of record supply, Prop Equity said, adding that besides high prices and a sluggish economy, many investors have turned wary because of concerns around a global trade war. Bloomberg added that real estate stocks have been amongst the worst performers this year and the gauge of property developers is down nearly 25% from its peak value.
Is The Economy Set To Turn?
The economy is still to turn but the policy backdrop is turning, says a new report by Garima Kapoor, economist and executive vice president at Ellara Securities. The report says that recent improvements in domestic macroeconomic data suggest the worst may be behind us and the triggers for a gradual improvement in corporate earnings are beginning to fall in place. The biggest shift is the domestic economic condition has been the decisive and proactive shift in the Reserve Bank's approach towards banking system liquidity and pickup in government spending, according to Kapoor, who also says that globally softness in the US dollar and crude oil prices provides the necessary tailwinds amidst that elevated trade and geopolitical uncertainty.
She says she remains positive on domestic cyclicals like non-bank finance companies, private banks, discretionary consumption players, especially in sectors where geopolitics strengthening like aviation and telecom and pricing power is solid like hotels, large diversified infrastructure players and select defence companies also benefiting from the geopolitical tensions in Europe. I reached out to her and I began by asking her to define the difference firstly between the economy and the backdrop to the economy and what was changing in that backdrop.
INTERVIEW TRANSCRIPT
Garima Kapoor: So economic policy basically means the drivers of the business cycle that the economy has two big agents as presently one is the government the other is the RBI which is a regulator as well as the creator of base money and the monetary policy setter. These two agents are basically driving your outlook which is turning more counter cyclical rather than post cyclical. So for example, in the last few years even as the potential growth in India was moderating, RBI continued to prevail with high real interest rates as well as tight liquidity policy.
At the same time the government of India which is another big agent of the economy was consolidating aggressively. Both these factors have now turned. The rate of consolidation of government here on will moderate and RBI will probably be gradually moving towards easy liquidity and a much lower real interest rate scenario than what has prevailed.
So when I say economic policy backdrop I mean the drivers of the business cycle which is the government fiscal policy and RBI the monetary policy.
Govindraj Ethiraj: If I were to pick up on government spending first are you saying that you're seeing clear signs of a shift or returning to the pace that we saw before elections?
Garima Kapoor: See the pace before elections is unlikely to be reached because this year the government is going to anyway undershoot by a trillion rupees which is already known to us because of the budget. But when I look at the pattern till the first quarter both central and state governments including that of CapEx and revenue were de-growing their expenditures by somewhere about one and a half percent de-growth. That de-growth now as we speak to the data is available till January.
So April-January has turned to a growth of eight percent. The last two-three months particularly have been encouraging on the central government front more so on the CapEx which was the biggest risk that was building into the markets and the system because the first six to seven months of execution was pretty weak. But there are clear signs things have picked up from a de-growth trajectory to a growth.
While we'll undershoot the budget the momentum is very very positive.
Govindraj Ethiraj: So when you look at these as levers you've talked about stance on liquidity and rates for fiscal and monetary fronts which is the government's approach to it. Then of course government spending. So in a way this would suggest that all these were the reasons why we saw the economy looking so strong in let's say last financial year.
Would you say that if we are able to see changes or positive shifts in these levers again the economy could grow as well?
Garima Kapoor: Yes. So the quarter two FI25 print of 5.4 percent was an impact or the dual impact outcome of impact of government slowing down its pace of spending aggressively as well as RBI tightening liquidity and bringing in macroprudential guidelines which was slowing the credit growth especially on the unsecured side. Both these levers have turned.
So I think from a business cycle perspective quarter two of financial FI25 was the worst. Incrementally things should start getting better here. Are we on a trajectory where the handle of growth can consistently move about 7 percent?
The answer is no. But are these two agents or drivers of economic policy enough to drive the economy in a range of six to six and a half percent notwithstanding the global risk particularly emanating from tariffs and trade uncertainties? The answer is yes.
Govindraj Ethiraj: What about the demand side? How is that looking to you? Because that obviously plays into how companies will perform and or how their earnings will do.
Garima Kapoor: Notwithstanding the general commentary for the last couple of quarters including the quarter for which we'll see the results coming in another month or so the commentary has not been very encouraging when it comes to demand especially from the listed corporates. But when I look at the macro policy turning around two things have decisively shifted. The last 10 years of this government were more about supporting the corporate sector either in capex or in terms of visibility of ease of doing business or in terms of cost of funds.
Now the shift is becoming more and more dynamic and pragmatic. The last 10 years were all about corporations probably at the expense of consumers. This policy or the budget has said to you that it is not going to be this at the expense of that.
It is going to be a more balanced approach. So this along with RBI's approach towards liquidity of great cards as well as probably its gradual easing of macro prudential tightening tells you with a lag consumption has to pick up. And now with the quarter one rebates that will start to kick in MFI 26.
So I'm pretty confident that the consumption cycle in financial year 26 is going to look much better than 25. Now when I say consumption cycle it necessarily does not mean listed entities because the pattern of India's consumption has shifted away from listed to unlisted traffic labels etc. So we'll have to look at consumption as a basket.
So things like experiential spending in terms of travel tourism places where there is a duopoly effect in terms of telecom or aviation or places where unsecured credit is going to probably show up meaningfully compared to last six to eight quarters in terms of your consumer lending of course is going to be the big driver or indicator of consumption.
Govindraj Ethiraj: So you also touched upon the role of the dollar which is weaker than where it was in previous weeks if not month and crude oil prices which have been maybe slightly low but definitely staying low and staying around that 72 dollar per barrel range. If this is a good thing which I'm assuming somehow it is, how is that translating into economic impact the way you measure it?
Garima Kapoor: A weak DXY cycle always benefits emerging markets. It benefits flows into emerging markets. Now the DXY has been weakening for the last quarter or so but even as the dollar was weakening the rupee was depreciating largely because of FBA outflows. Now that we have seen the material correction in the rupee does seem like the cycle of weakness of the rupee probably is closer to its real effective exchange rate or closer to its trough.
So now you will start to see the benefits of weaker dollar kick in as you've seen the way currency has moved for last two three business days business day as well as the way we've seen flows come in equity market we've seen about a billion dollar worth flows come in in last two three trading sessions. So broadly a weaker dollar should benefit with a emerging market portfolios including that of India and a very restrained rupee in last whichever business cycles very restrained oil prices always benefit in their business cycle because it gives greater firepower to the government in terms of its spending and helps to restrain input price pressures. So I think these are the global levers that should add up to your domestic business cycle turning around.
Govindraj Ethiraj: Garima, thank you so much for joining me.
Garima Kapoor: Thank you Govind.
Private Sector Is Not Spending Much
Trading agency ICRA on Monday said private capital expenditures shared in the overall investments in the economy has fallen to a decadal low of 33% in 23-24 that's last financial year. Public expenditure has been leading investments in recent years as we just discussed as well. The private sector has instead focused on deploying excess cash at reducing loan burdens rather than investing in new facilities choosing to run at high capacity utilisation according to that report quoted by PTI.
The part about high capacity utilisation running is quite interesting while we know it but it suggests that industry is preferring to run at high capacity utilisation at this point and maybe stretch it right till the end at least for some companies or many companies. Weak domestic consumption especially urban muted export demand and the influx of cheap Chinese imports in some sectors among other factors has restricted capacity expansion plans of Indian companies according to ICRA. Gross fixed capital formation or GFCF as it's called encompassing the gross addition to fixed assets and intangibles represents about 30% of India's nominal GDP making it the second largest component after private final consumption expenditure.
Now this has been slowing since 22-23 thanks to a slowdown in private sector activity and on the other hand government capex and household investments in real estate have helped it. Overall the cash generation of companies has consistently improved post the Covid shock which has led to a steady reduction in gearing levels to 0.9 times in 23-24 from 1.1 times in 2014 according to that ICRA report which is of course the difference between debt and equity. Gearing refers to the proportion of a company's operations funded by debt which is borrowings versus equity.
Could things change here? Well the stage is set so to speak. De-leveraged corporate balance sheets together with improving cash flows from operations point towards favourable conditions for an upturn in the private capex cycle according to ICRA.
The United States Is Searching For Eggs
The United States has almost doubled imports of Brazilian eggs once used only for pet food and is considering relaxing regulations for eggs laid by chickens raised for meat as the current administration tries to bring down the sky-high prices spiked by bird flu according to Reuters. Wholesale egg prices were up almost 54 percent last month before easing somewhat this month in the United States that is. The egg shortage has obviously fuelled food inflation even as Trump's trade disputes have threatened to disrupt supply chains and raise costs for fresh produce and other goods.
While none of the Brazilian or broiler chicken eggs could wind up on grocery shelves they could be used in processed foods such as cake mixes, ice cream and salad dressing freeing up more fresh eggs for shoppers. Of course allowing use of broiler chicken eggs would require changing regulations and food safety experts have warned that this could risk tainting food products with harmful bacteria. The Trump administration is also promoting imports from countries like Turkey and South Korea that usually do not send many eggs and has also asked Europe reportedly to send more.
In case you would like to know, India ranks second in the world in terms of total egg production and that number was up about three percent compared to the previous year. Total egg production from commercial poultry is about 115 billion eggs and from backyard poultry is about 2.7 billion eggs. Per capita availability of eggs in India is about 103 eggs per annum and the top five egg producing states are Andhra Pradesh, Tamil Nadu, Telangana, West Bengal and Karnataka which represent about 65 percent of total egg production in India.
