Is The Market Correction Over In 2025? | EduFund Insights

Markets rarely move in straight lines. After an extended rally, corrections are not only expected—they’re healthy. They help cool down stretched valuations and give investors a chance to re-enter at more reasonable levels. Many investors are now asking, Is the market correction over?

We witnessed this recently.

The Nifty 50 touched an all-time high of 26,277.35 on September 27, 2024, before entering a correction phase that saw it drop to 21,743.65 by April 7, 2025—a decline of nearly 17%. However, in just nine trading sessions, the index staged a sharp recovery of about 12% to close at 24,359.30 on April 23, 2025.

As shown in the chart above, the Nifty 50 took 158 days to form a trough after reaching its all-time high on September 27, 2024. During this period, it made three lower peaks before finally bottoming out on March 4, 2025.

Interestingly, from that trough, the index took just 44 days to reclaim the previous peak (P4) made on February 4, 2025, and only another 4 days to surpass the third peak (P3)—indicating a swift and strong recovery.

Midcap and Small-cap recovery

And this recovery isn’t limited to large caps. The Nifty Midcap 150 Index and Nifty Smallcap 250 Index have also bounced back strongly, closing 17.14% and 19.59% higher, respectively, from their recent lows after touching all-time highs in September 2024. This broad-based participation adds strength to the recovery narrative.

Naturally, this has left investors wondering:

Is the correction behind us, or is this just a temporary bounce?

Let’s explore the market signals, the drivers behind the recovery, and the potential risks ahead to answer this question.

Also read: Investment strategies in the volatile market

What is leading the market correction?

1. FII buying

One of the key drivers of the recent recovery has been the return of Foreign Institutional Investors (FIIs). After five consecutive months of persistent selling—from October 2024 to February 2025—FIIs finally turned marginally positive in March 2025. What’s even more encouraging is the trend since April 15, 2025—FIIs have been net buyers every single day, signaling a clear shift in sentiment. Their renewed interest adds strength to the market, especially given the influence FII flows have on short-term direction.

2. RBI push

The Reserve Bank of India (RBI) has taken steps to inject liquidity and support market sentiment. Most notably, it cut the repo rate by 25 basis points, signalling a shift toward an accommodative stance. Additionally, on April 21, 2025, the RBI released the final guidelines under the Basel III Liquidity Coverage Ratio (LCR) framework, relaxing some of the provisions from its earlier draft issued in July 2024. A key change was in the treatment of retail deposits with internet and mobile banking (IMB) facilities—reducing the additional run-off factor from 5% to 2.5%. This move, driven by industry feedback, has been well received by the markets. The banking sector, which makes up a significant portion of the market indices, responded positively to these changes, helping drive the broader recovery.

3. Global updates

After months of rising trade tensions, there are now signs that the U.S. and China may return to the negotiating table on tariffs. This has brought some relief to global markets, as smoother trade relations could support global growth. In addition, President Donald Trump recently said he does not plan to remove Federal Reserve Chairman Jerome Powell. This helped calm investor nerves and added to the positive mood in markets around the world, including in India.

4. Corporate earnings

While Q4 earnings are expected to reflect some impact from recent disruptions, markets appear to be looking beyond the short-term and are optimistic about the guidance for the upcoming quarter and FY26. As expected, the IT sector has delivered subdued results, weighed down by global headwinds. In contrast, banking has shown strong performance, supported by healthy credit growth and stable asset quality. Domestic demand-driven sectors like FMCG are also expected to perform well, benefiting from resilient consumption trends. This forward-looking optimism and belief that earnings momentum will pick up in the coming quarters is supporting the recent market recovery.

Also read: Does time in the market beat timing the market?

Is the market correction really over?

So, is the market correction behind us? That’s a tough call—and one no one can predict with certainty.

From a valuation perspective, the markets don’t appear overheated. The Nifty 50’s Price-to-Earnings (P/E) ratio stands at 21.99, which is broadly considered reasonable by historical standards.

But valuations alone don’t drive markets—corporate earnings and the overall outlook will play a much bigger role. If companies continue to deliver strong results and most importantly, offer a positive outlook, there’s a good chance that the recovery may sustain.

In addition, any de-escalation in global tensions—such as smoother U.S.-China relations—could further support market sentiment.

For now, it’s important for investors to stay grounded in fundamentals and focus on how macro trends and earnings unfold in the coming weeks.

What should a retail investor do?

Markets fluctuate, but discipline compounds. Patience pays more than prediction

Wealth isn’t built in moments—it’s built by staying. Trying to predict short-term ups and downs can be tricky—even impossible. If you’ve been waiting for the “perfect” correction to invest, you might end up missing the opportunity altogether.

The most practical approach is to invest in tranches or through SIPs/STPs. This strategy helps average out your purchase cost over time—you may not always buy at the lowest point, but you also avoid investing at the highest.

That said, asset allocation is crucial. Overinvesting in a single asset class or sector can increase risk and hurt overall portfolio balance. A well-diversified portfolio that aligns with your risk profile and investment horizon is more likely to deliver consistent results.

Focus on quality schemes—those with proven track records, consistency, and suitability to your financial goals.

Should you have any queries, feel free to reach out to us at research@edufund.in.

Disclaimer: Mutual fund investments are subject to market risk. Please read all the scheme related documents carefully.