Markets Skid: Scepticism Greets Unloved Rally

Indian equity markets are navigating a cautious rebound after a significant sell-off that began in early March. This three-day recovery, marked by scepticism, has seen indices recover up to 2.9% from their recent lows. The market's unease stems from the ongoing conflict in West Asia, which initially spooked investors and led to a roughly 8.3% drop in major indices.

Analysts describe the current bounce as potentially a 'dead cat bounce,' questioning its durability. Factors contributing to this sentiment include persistent foreign institutional selling, with overseas funds withdrawing approximately ₹16,400 crore over the last three trading sessions. This outflow contributes to a March selling tally nearing ₹75,000 crore, the highest since January 2025.

Expert opinions highlight caution, with investors wary of uncertain geopolitical outcomes. Lakshmi Iyer of Bajaj Alternates noted that clarity on the war's endgame is crucial for assessing the sustainability of market gains. Nilesh Jain of Centrum Finverse indicated only moderate reductions in foreign investors' bearish bets, and uncertainty persists regarding whether the Nifty has formed a bottom.

Market participants are hesitant to aggressively deploy capital into equities amidst ongoing geopolitical risks, such as the potential closure of the Strait of Hormuz. Siddarth Bhamre of Asit C Mehta Intermediates suggests that current conditions do not warrant a bullish outlook, and further declines are possible if the conflict is not resolved.