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smallcase today released a survey of smallcase managers on markets and investment trends for 2025. With over 150 managers on the smallcase platform, the survey indicated that over 50% smallcase managers expect the Nifty50 index to be in the range of 25,000-28,000 by the end of 2025. As per the survey, most managers believe that the prominent investment themes in CY25 will be Green energy, IT and Banking. The IT sector is expected to rise steadily in the face of digital transformation and growing global outsourcing tendencies, while better credit growth and steady asset quality are likely to be key factors in the success of the Banking sector.

As per the survey, over 40% of smallcase managers in the study predicted PSUs (including defence) and IT as underperforming sectors in FY25 as they expected it to face headwinds, potentially underperforming due to valuation concerns, global economic uncertainties, and a slowing demand environment in certain segments. Although it has long-term potential, these sectors could experience short-term pressures.

Speaking on the survey, Vasanth Kamath, Founder and CEO, smallcase said, "The findings of our survey underscore the dynamic nature of equity markets and highlight investment themes that are expected to be influenced in 2025. We believe smallcase managers have a higher vantage point to identify emerging trends and shifts, and help investors take advantage of these changes with their diversified portfolios."

Key Themes to Watch in 2025

Value and thematic strategies are expected to gain significant traction in 2025. With market conditions likely favoring undervalued stocks and sectors positioned for recovery, value-focused strategies will appeal to investors seeking stable returns. Additionally, “thematic portfolios, which align with emerging trends such as green energy, technology, and defense, will continue to interest investors looking to capitalize on long-term growth drivers” comments one smallcase manager.

In the green energy transition, recycling and sustainability are poised to become critical areas of focus, alongside dominant trends in manufacturing and consumption.

Public Sector Undertakings (PSUs), particularly in the banking sector, are expected to regain prominence in the coming year. Additionally, government-led capital expenditure (capex) initiatives will once again take center stage, driving infrastructure development and boosting economic activity across multiple sectors.

The Indian IT industry is also projected to witness significant growth in AI-driven services, positioning itself as a key player in the global technology landscape.

Inflation Rate Expectation: 60% of smallcase managers have forecasted the expected inflation rate for India in FY25 to be in the range of 4-5%, aligning with the Reserve Bank of India's target range. While 6% anticipate inflation could exceed 6% due to external reactions or supply disruptions, others are more optimistic, foreseeing inflation to drop below 4%, supported by improved fiscal discipline. Overall, the consensus leans towards moderate and manageable inflation levels.

RBI Rate cut Expectation: The outlook for RBI's monetary policy in FY25 reflects a mix of expectations by smallcase managers, with 50% anticipating a rate cut of 25-50 basis points. A small percentage believe it may go up to 50-100 bps and few predict that there will be no rate cut at all. The prevailing sentiment suggests a balanced approach, with any rate decisions closely tied to inflation trends and external conditions.

GDP growth: The survey projects GDP growth rate for India in FY25 to be in the range of 6-7%, reflecting strong economic fundamentals and resilient growth drivers. Some projections are slightly more optimistic, expecting growth between 7-8%, while a few managers being cautious estimates place it at 5-6%, citing potential global and domestic uncertainties.

Market Outlook

The market outlook for CY25 will be shaped by both global and domestic factors, presenting opportunities and risks. One key risk is the potential for a global economic slowdown or recession, particularly in major economies such as the US, Europe, or China. This could negatively impact India’s exports and foreign capital inflows. Additionally, geopolitical tensions, such as the ongoing Ukraine conflict or rising strains around Taiwan, could disrupt global supply chains and increase commodity price volatility.

Domestically, unforeseen inflationary pressures due to spikes in crude oil, food, or commodity prices remain a concern, as they could derail growth projections and monetary policy stability. Policy uncertainty, including unexpected changes to taxation or regulatory frameworks, could also create headwinds for specific sectors. Lastly, corporate earnings growth could face challenges if current market estimates turn out to be overly optimistic.

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