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Ongoing geopolitical tensions and the resultant flight to safety has increased stock market volatility. After peaking in September 2024, markets continued witness a sell-off in 2025 as well before making a sharp recovery in April 2025. This is evident from the change in the country’s listed market capitalisation which declined 20% from its September 2024 highs but rebounded 10% from its March 2024 lows and is now closer to USD 5 trillion (as on April 30^th, 2025).

Key observations

* Flight to safety is the big play: Ongoing geopolitical challenges, weak global equity markets, and strong demand from central banks have driven domestic gold prices to an all-time high of over INR 1,00,000 per 10g. However, a comparison between gold prices  and the Nifty 50 index trends suggests that the prospects of equities outperforming gold have turned higher going forward.

* Changing tide of institutional participation: The tides are changing with Domestic Institutional Investors (DIIs) overtaking Foreign Institutional Investors (FIIs) in Nifty 500 ownership. The dominance of domestic flows led to a significant shift in institutional holdings across India Inc. FII ownership in the Nifty 500 dipped to an all-time low of 18.8%, while DII ownership rose to a record high of 19.2%. As a share of the free float, FIIs’ ownership dropped to a historic low of 37.3%, whereas DIIs’ ownership jumped to 38% in March 2025.

* Valuation perspective: Large-caps seem fairly valued at the current moment while broader markets continue to be expensive. The 12M forward P/E of the Nifty 50 is 12% below its September 2024 high, while mid- and small-cap valuations have fallen 22% and 1%, respectively, over the same period. The Nifty 50 is trading at its long-term average (LTA), while mid- and small-cap indices are trading at 20% and 47% premiums to their LTA, respectively.

Market mechanics: Performance in April 2025

 Stock markets in India have been fairly resilient, taking a tumble at the beginning of the year, only to stage a smart recovery in April. Stock prices of ~92% of NSE 500 companies declined between the September 2024 highs and March 2025 lows, while ~85% of the companies posted a stock price increase between the March 2025 lows and April 2025. While the NSE 500 index is 10% below its September 2024 highs, about 65% of NSE-500 companies are still 10% below the levels of the September 2024 market highs.

Performance in April 2025

* From market cap perspective, mid-caps outperformed both large-caps and small-caps during the month while private banks significantly outperformed with most of the other sectors edging lower in CY25YTD.

* A look of Nifty indicates that 66% of its constituents ended higher in April 2025 with 33 stocks closing higher on a month-on-month basis and 26 outperforming the benchmark. Overall, ~28 Nifty constituents traded higher in CY25YTD.

* A look at the Sensex indicates that 68% of BSE constituents ended higher in April 2025 with 136 BSE 200 stocks closing higher on a month-on-month basis and 82 stocks trading higher in CY25YTD.

* In terms of sectoral performance, private banks and Oil & Gas’ weights rise while technology’s grip weakens. In April 2025, the weights of Private Banks and O&G (Reliance) increased 60bps and 50bps MoM, respectively, while Technology’s weight saw a sharp reduction of 80bp MoM among the Nifty-50 constituents.

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