How should investors navigate current stock market volatility? Experts weigh in | Stock Market News

Indian stock markets have witnessed a strong comeback in March, bouncing back from a prolonged sell-off that began in October 2024. The steep decline over the past five months had made Indian equities among the worst-performing markets globally, raising concerns among investors.

Both the Nifty 50 and Sensex have gained almost 7 percent so far this month, marking their best monthly performance since June 2024. This sharp rise signals a much-needed recovery for the benchmark indices, which had been reeling under the pressure of persistent foreign portfolio investor (FPI) outflows, rising US bond yields, and valuation concerns.

The revival has not been limited to large caps. Mid- and small-cap stocks, which were heavily battered during the correction, have also rebounded sharply. The Nifty Midcap 100 has jumped 10 percent in March so far, while the Nifty Smallcap 100 has surged 12 percent, outperforming the broader market. This resurgence reflects renewed confidence in broader market segments, which had faced the brunt of the recent sell-off.

Foreign Investors Drive the Recovery

The recent rally has been largely fueled by a shift in sentiment among foreign portfolio investors (FPIs). Although they have remained net sellers in the broader market, the pace of selling has slowed significantly compared to previous months.

FPIs were net buyers in two of the last three sessions, signaling that institutional players are gradually turning optimistic. However, they remain cautious, having been net buyers in only five out of 57 trading sessions in 2025 so far. Since the market peak in late September 2024, FPIs have offloaded nearly $29 billion worth of Indian equities, contributing to the extended market weakness.

The recent US Federal Reserve’s monetary policy stance has played a significant role in reviving sentiment. The Fed maintained its projection for two rate cuts in 2025, which is seen as a positive signal for emerging markets like India. Lower US interest rates reduce the attractiveness of US bonds, making higher-yielding emerging market assets more appealing to global investors. This policy shift has provided some relief to the rupee, which had been under pressure due to capital outflows.

Apart from easing FPI outflows, the recovery has also been driven by bargain hunting. The recent correction, which saw several stocks trading at steep discounts to their previous highs, made valuations more attractive. This encouraged both institutional and retail investors to accumulate quality stocks at discounted prices.

Several fundamentally strong stocks, which were previously considered overvalued, have now become appealing investment opportunities, prompting selective buying. The correction has helped cool off frothy valuations, creating room for upside potential.

Experts Advise Caution and Strategic Investing

Despite the encouraging rebound, market experts caution that volatility could persist in the near term. They advise new investors to adopt a disciplined approach, avoid impulsive decisions, and focus on long-term fundamentals rather than chasing short-term trends.

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, warns against extrapolating current market trends into the future.

“A common mistake new investors make is assuming that a rising stock will keep going up or a falling stock will continue declining indefinitely. However, markets move in cycles, influenced by factors such as economic shifts, earnings growth, interest rates, and changing sentiment. Recognizing these cycles is key to making informed investment decisions,” he explains.

Sheth advises investors to focus on identifying market cycles and adjusting their strategies accordingly, rather than reacting emotionally to short-term market moves.

Devarsh Vakil, Head of Prime Research at HDFC Securities, stressed the importance of diversified portfolios and disciplined asset allocation during uncertain times.

“Navigating uncertain markets requires a well-defined investment plan, including exposure to fundamentally strong opportunities. The current market pullback offers selective buying opportunities, driven by improving manufacturing activity, credit growth, and consumption patterns,” he notes.

Vakil believes that domestic economic indicators are showing signs of recovery, making it essential for investors to focus on quality stocks with robust fundamentals rather than speculative bets.

Outlook on Indian Markets

Mahendra Patil, Founder and Managing Partner at MP Financial Advisory Services remains optimistic about India’s long-term growth story, underpinned by strong digital infrastructure, ongoing economic reforms, favorable demographics, and rising consumption potential.

“Periodic market corrections offer chances to reallocate into high-quality Indian equities with better risk-reward profiles. However, investors should remain mindful of geopolitical tensions and global uncertainties, which could introduce fresh volatility. Going forward, the market’s direction will hinge on domestic consumption trends and corporate earnings resilience,” he added.

Patil highlighted the need for staying invested in quality companies despite near-term volatility, as India’s long-term growth trajectory remains intact.

Overall, the sharp rebound in Indian equities in March signals a positive shift in sentiment, driven by easing FPI outflows, improved valuations, and selective buying. However, market experts caution that volatility may persist, urging new investors to focus on long-term fundamentals, disciplined asset allocation, and diversification.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.