Party At Dalal Street, Afterparty At Mint And Bond Streets 

Grammar Nazis scoff when even a sustained rise in stock prices or indices is termed a “rally.” They’ll point to the French origin of the word (meaning “bring together again”) and cite the Oxford definition: “(in sport or on the Stock Exchange) an act of returning to a strong position after a period of difficulty or weakness.”

A search on the most popular AI platform doesn’t come with such hangups. It defines a rally as a “sustained and broad-based upward movement in prices.” It also includes further categories like the relief rally, which comes closest to the purist definition.

This week, using the word "rally" wouldn’t raise eyebrows among either purists or modernists—if one were to use such terms. After all, it came after weeks of taking a beating and what started on Monday ended with party on Friday. 

And this wasn't true just for equities. The Indian currency joined the party, and bonds shook a leg too.

Equities: Firing on all cylinders 
Let’s start with Indian equities. They delivered a resounding performance, as the Nifty 50 surged 4.3%, marking its best weekly return since February 2021. The BSE Sensex (up 3.5%) followed suit, driven by a broad-based rally supported by global optimism and renewed foreign investor interest.

In total, the market added over ₹20 trillion in capitalisation—reflecting revived investor confidence across the board.
India VIX, the volatility index, cooled off, as typically seen during bullish phases.

Smallcap and microcap indices led the charge this week, showcasing strong risk-on sentiment among both retail and institutional investors. The Nifty Smallcap 100 rallied 8.64%, and the Nifty Midcap 100 soared 7.74%. The strength in these segments signals confidence in the broader economic recovery and domestic growth prospects, particularly amid improving macro indicators and dovish cues from global central banks.

Nifty IT underperformed broader indices, gaining only 1.6%, possibly due to margin concerns, cautious outlooks from U.S. clients, and rupee appreciation, which can dent dollar revenues. Nifty FMCG also lagged (up 2.1%) as investor appetite shifted from defensive sectors to more cyclical, high-beta plays amid strong market momentum.

Rupee: Not on RBI crutches
The Indian rupee also recovered some ground this week, closing at its highest level in over two months against the U.S. dollar. On Friday, it settled around ₹85.9725/$. The rupee appreciated 1.2% during the week—its strongest gain since January 2023.

A surge in foreign portfolio investment into Indian debt markets buoyed demand for the currency. So far in March, FPIs have pumped nearly $3 billion into Indian debt.

Dovish signals from the U.S. Federal Reserve—indicating potential rate cuts later in 2025—also softened the dollar index globally. The shift in policy tone reduced the greenback’s appeal, benefiting emerging market currencies like the rupee.

With Brent crude staying below critical resistance levels, India’s import bill received some relief. This not only supported the rupee but also helped improve trade balance figures. India’s latest trade data showed a narrowing deficit, further strengthening the rupee. The country’s merchandise trade deficit narrowed to a 42-month low of $14.05 billion in February 2025. A healthier external account lends long-term support to the currency.

Bonds: Let’s join the Fun
Indian government bonds also ended the week on a strong note, as benchmark yields declined significantly amid renewed investor interest and supportive global cues. The 10-year bond yield fell nearly 7 basis points to 6.62%—its steepest weekly drop in four months.

The rally was driven by rising demand from domestic institutions such as mutual funds and banks, buoyed by expectations that interest rates have likely peaked. Sentiment was further lifted by the U.S. Fed’s dovish tone, which reinforced global expectations of rate cuts later this year, sparking risk-on flows into emerging markets.

Additionally, cooling crude prices, stable inflation, and a stronger rupee gave debt investors added comfort. The RBI’s continued liquidity infusion measures also supported demand for fixed-income assets.

Keeping fingers crossed
This week marked a powerful return of confidence to Indian equities, debt markets, and the domestic currency. Favourable global cues, robust domestic data, and sectoral rotation all came into play.

Still, global geopolitical risks—such as trade tensions and regional conflicts—remain in the backdrop. They could dampen sentiment and put markets back on shaky ground.