Stock market investors in India breathed a sigh of relief in the first week of March as the benchmark indices halted their falling spree. The Nifty50 index closed in the green for the third straight day on March 7, 2025, up by 0.3 per cent or 7.8 points. On the other hand, the 30-share Sensex closed flat with a slight negative bias at 74,332.58, down by 7.51 points or 0.01 per cent after closing in the green for two straight days.
Trading in the Indian stock markets is scheduled to resume on March 10, 2025. Here’s a look at some of the key factors which are likely to impact the stock market in the second week of March.
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European Rearmament
On March 4, 2025, the European Commission proposed to borrow up to €150 billion (approximately $157.76 billion) to lend to European Union governments. The commission has proposed that EU countries should use the fund for a ‘rearmament plan’. The rearmament proposal comes amid the ongoing war between Russia and Ukraine and uncertainty over continued US protection to Europe. Notably, US President Donald Trump has paused military aid to Ukraine.
While the development took place this week, the markets are likely to be impacted by the developments in the coming week as well. Shares of major domestic defence sector players have risen following the announcement. The Nifty India Defence index has also gained over 6 per cent in the four sessions between March 4 and March 7, 2025.
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US Bond Yields Rise
On March 7, 2025, the US 10-year treasury yields rose following comments by the US Federal Reserve Chair Jerome Powell, that the central bank is likely to be patient in determining when to cut interest rates. The US Fed chair said that it remains to be seen whether Trump’s tariff plans can prove to be inflationary. The yield on the benchmark US 10-year Treasury note rose 3.8 basis points (bps) to 4.32 per cent. For the week, the 10-year yield surged by 9 bps, ending a five-week long decline. The two-year US Treasury yield gained 4.1 bps to 4 per cent and the yield on the 30-year bond advanced by 3.70 bps to 4.61 per cent.
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Typically, US bond yields and stock markets have had an inverse relationship. Both bonds and Indian securities vie for investor funds. Thus, an increase in US bond yields can potentially move foreign investors away from Indian equities to US bonds.
US-Ukraine Talks
Trump met his Ukrainian counterpart Volodymyr Zelenskyy on February 28, 2025. A verbal clash broke out between the two leaders at the Oval Office. However, a report by the New York Times stated that senior US and Ukrainian officials are likely to meet this week to discuss the first steps of a deal that could seek an end to the war in Ukraine. Additionally, both Trump and Zelenskyy have confirmed the meeting, which is expected to take place in Saudi Arabia. While it remains to be seen whether a peace deal will be brokered by the US between Russia and Ukraine, an end to the war is likely to impact economies positively. The markets are likely to factor in the result of the meet in the second week of March.
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Trump’s Tariffs On India
On March 7, 2025, Trump talked about the massive tariffs the US is being charged by India. Earlier, he had also announced the imposition of reciprocal tariffs on other trade partners of the US. Ahead of the imposition of trade tariffs on India on April 1, 2025, Trump told reporters at the White House that India has agreed to slash its tariffs. Earlier on March 6, Trump suspended tariffs of 25 per cent which were imposed on Canada and Mexico.
“India charges us massive tariffs. Massive. You can’t even sell anything in India... They have agreed, by the way, they want to cut their tariffs way down now because somebody is finally exposing them for what they have done,” Trump said.
Notably a tariff cut by India on US made-goods is likely to affect how markets will trade in the coming week.
Crude Oil Prices
On March 7, 2025, Russia’s Deputy Prime Minister Alexander Novak said that the OPEC+ group has agreed to start increasing oil production from April, but could reverse the decision if it sees market imbalances. Additionally, US Secretary of Energy Chris Wright said that the country plans to purchase oil worth $20 billion to refill its strategic petroleum reserve. Notably, the two statements contributed in lifting the price of Brent crude, which has been sinking since mid-January. Brent Crude prices increased 2.8 per cent to over $71 a barrel, and later traded at about $70.2 per barrel.
Relentless FII Selling
Foreign institutional investors (FIIs) have remained net sellers so far this year as they offloaded equities worth Rs 78,027 crore in January 2025 and Rs 34,574 crore in February. In March, so far, FIIs have remained net sellers, selling equities worth Rs 15,501.57 crore, while domestic institutional investors (DIIs) have bought equities worth Rs 20,950.89 crore. The persistent FII selling has led to a consistent decline in their assets under custody (AUC) which fell to a 13-month low in February. The AUC of FIIs was Rs 62.38 lakh crore, marking its lowest level since January 2024.
