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The latest insights from corporate leaders and industry experts reveal a cautious yet strategic outlook for 2025. While India’s economic fundamentals remain strong, slowing earnings growth, inflationary concerns, and global headwinds are impacting business sentiment. Sectors such as BFSI, healthcare, and capital goods are showing resilience, while autos, real estate, and discretionary consumption continue to struggle.

This edition of Strategy Voices highlights corporate perspectives on economic trends, sectoral shifts, and market positioning strategies for 2025.

Note 1: Corporate caution prevails amid macroeconomic headwinds

India Inc. is approaching 2025 with caution, balancing growth aspirations with economic realities. While public investments and domestic consumption continue to support growth, global slowdown, supply chain disruptions, and inflationary pressures remain key concerns.

Major Insights

Earnings Slowdown and Market Pressures

Corporate profitability is under strain, with Nifty-50’s FY25 earnings growth projected at just 5% YoY, a sharp drop from the 20%+ CAGR recorded between FY20-24. This slowdown reflects broader economic challenges, including inflationary pressures, high interest rates, and cautious consumer spending, all of which have dampened corporate earnings momentum.

Sectoral Divergence – Winners and Laggards

A clear divide is emerging across sectors. BFSI, healthcare, and capital goods continue to show resilience and stable growth, driven by strong domestic demand and policy support. In contrast, automobiles, real estate, and consumer discretionary are facing muted demand, cost inflation, and margin pressures, limiting their near-term growth prospects.

Export-Driven Sectors Face Headwinds

Industries reliant on exports, such as IT services, chemicals, and automobile exports, are struggling with slower global economic growth, supply chain disruptions, and pricing pressures. The IT sector, a traditional growth driver, is witnessing weaker deal momentum and cautious client spending, while chemical exports are under stress due to lower global commodity prices and subdued international demand.

Capex Cycle Offers Long-Term Growth Potential

Despite these challenges, India’s capex cycle remains a bright spot, providing long-term growth opportunities. Sectors such as railways, defence, and renewable energy are seeing steady investments, backed by government initiatives and private sector participation. These infrastructure-led sectors are expected to act as economic stabilizers, cushioning the impact of demand slowdowns in other industries while supporting sustained expansion in the coming years.

Note 2: Sectoral shifts – Strength in some, stress in others

A clear divide is emerging across sectors, with some leveraging structural tailwinds, while others struggle with demand contraction and cost pressures. The BFSI, pharma, and capital goods sectors continue to see positive traction, while autos, metals, and consumer discretionary remain under pressure.

Major Insights

BFSI – Growth Holds, But Margin Pressures Persist

The BFSI sector continues to witness stable loan growth, but net interest margin (NIM) compression and asset quality concerns remain key challenges. NBFCs face rising funding costs, impacting profitability, though gold loans remain a bright spot, driven by strong rural demand and increasing gold prices.

Healthcare – Chronic Therapies Outperform, but US Generics Struggle

The healthcare sector continues to see steady domestic demand, particularly in chronic therapies, which are driving growth. However, US generics remain under pressure, with pricing erosion and intense competition limiting profitability. The biopharma manufacturing segment is gaining traction, with companies focusing on contract development and manufacturing (CDMO) and biosimilars to drive long-term expansion.

Infrastructure & Capital Goods – Public Capex Supports Growth

Infrastructure and capital goods remain key beneficiaries of public capex, particularly in defence, railways, and renewables. The sector is seeing healthy order inflows, and private sector capex is expected to accelerate by 4QFY25, driven by PLI schemes, industrial automation, and strong domestic demand.

Automobiles – Demand Slows Despite EV Growth

The automobile sector is experiencing weaker demand in passenger vehicles and two-wheelers, even as EV adoption picks up. Export markets remain sluggish, with weak demand in Europe and the US impacting OEM production and sales outlooks.

Consumer & Retail – Urban Slowdown, Rural Recovery

The consumer and retail sector is seeing muted urban demand, while rural spending shows early signs of recovery. However, high input costs and weak consumer sentiment continue to put pressure on growth, leading retailers to adopt a cautious expansion strategy for the near term.

Note 3: Investment Strategy for 2025 – Balancing Valuations, Growth, and Market Risks

With earnings growth slowing to 5% YoY in FY25 from 20%+ CAGR between FY20-24, a stock-specific and sector-focused approach is key. High valuations, global risks, and muted corporate profitability require investors to prioritise sectors with strong earnings visibility and sustainable demand drivers.

Sector Allocation Strategy

Overweight Sectors – Consumption, BFSI, IT, Industrials, Healthcare, Real Estate

* BFSI benefits from stable loan demand and strong asset quality.

* Consumption and retail stocks gain from premiumisation trends.

*Healthcare and pharma offer resilience through chronic therapy demand.

* Industrials and real estate benefit from infrastructure push and capex revival.

Underweight Sectors – Oil & Gas, Cement, Automobiles, Metals

* Automobiles face weak PV and two-wheeler demand, high financing costs.

* Oil & gas, metals suffer from global price volatility, weak exports.

* Cement margins remain under pressure despite infra-led demand.

Top Stock Picks for 2025

Large Caps – ICICI Bank, SBI, Bharti Airtel, L&T, Sun Pharma, Maruti Suzuki, Titan, Trent

* ICICI Bank, SBI – Strong loan growth, asset quality.

* Bharti Airtel – 5G adoption, ARPU growth.* L&T – Infra expansion, strong order book.

* Sun Pharma – Specialty drugs, chronic therapy demand.

* Maruti Suzuki, Titan, Trent – Domestic consumption plays.

Midcaps & S+mallcaps – Indian Hotels, Dixon Tech, Godrej Properties, Coforge, Page Industries

* Indian Hotels – Travel and tourism rebound.

* Dixon Tech – PLI-driven electronics growth.

* Godrej Properties – Urban housing demand surge.

* Coforge – Digital transformation, cloud adoption.

* Page Industries – Premium apparel, athleisure growth.

Disciplined Investing Remains Key

With elevated valuations and global uncertainties, investors should focus on high-quality large caps and select midcaps, ensuring liquidity and stable earnings visibility for long-term portfolio resilience.

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