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Below the Quote on Views on Indian Markets in 2025 By Manish Jain - Director of the Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets

Before we start with some of the recent readings and data, I would like to highlight one important fact: post covid Indian markets have delivered fantastic results. In the last 4 years, NIFTY itself has risen by more than 3 times.

India GDP print was 5.4% in Q2FY25 which was below expectations. India GDP is expected to gain momentum back in 2025 due to investment boost on public and private side, monetary easing, improvement in consumption demand and continued growth momentum in services sector.

Despite slowdown in last quarter, India’s GDP still registered highest growth across Top 10 economies globally. Global organizations like World Bank, IMF, ADB are forecasting average growth of 6.7% for FY25/ FY26. This growth rate is still the highest among its closest comparable economies.

Mr. Manish Jain - Director of the Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets, said, "Despite recent challenges, India's economic trajectory remains strong, with GDP growth outpacing global peers. As we approach 2025, sectors like IT, Auto, BFSI, and Solar offer promising opportunities. While FPI outflows and inflation risks linger, domestic flows and resilient consumption support the market. Investors should stay patient, keep some cash on hand, and seize potential dips in the coming months for long-term rewards."

Let’s look at the bigger picture: India is expected to become USD 10tn economy in next 7-8 years. Assuming MCap to GDP ratio of 1.3-1.4, even in this base case scenario return could be in mid-teens around 13%. 

As an investor in India markets, one needs to remain watchful of inflation trajectory, foreign portfolio investment or FPI outflows, any slowdown on domestic monthly SIP flows, strong dollar and US policies. Geopolitical events are a global risk which can impact Indian markets as well.    

Inflation rose to 6.2% in Oct 2024 due to food inflation; however slowed to 5.5% in Nov 24. In the recent FOMC meeting, Fed showed concerns over rising uncertainties which may lead to jump in inflation due to trade tariffs and slowing global economic growth. The good news is that in India, moderation in food inflation will bring the headline inflation down. Lower crude will continue to pull down the prices.

Total FPI outflow in CYTD 24 is close to USD 34 bn. This selling was due to valuation, poor earnings growth, China stimulus and expectation of slower future rate cuts in the US. Before resuming buys in India, FPIs are likely to look for new US government policies and economic growth developments in India. ~USD 3bn monthly SIP and consistent domestic flows are able to handle these outflows very well.  

Strong dollar is expected to keep pressure on INR.  US policies, trade tariffs and recent comments on BRICS de-dollarization may cap the market upsides in the near term.

As we enter in 2025, we believe that a few sectors and segments will outshine others:

* IT would be the most favoured sector as of now. Trump policies, lower taxes, new trade tariffs will strengthen the dollar and depreciating INR could help IT sector. DOGE will push for AI and digitization. Nifty 50 IT weights are near bottom since 2011. Recovery in BFSI segment and the US markets signals potential demand stabilization.

* In Auto, 2 wheeler and tractors are expected to lead because of rural market recovery, marriage related spends, strong Kharif crop, and favorable Minimum Support Price. Increase in traction of key industries like construction, mining, agriculture, and capex for infrastructure projects can be positive for CV segment.

* In BFSI, it’s time to look at non-lending businesses like Market Infrastructure, Wealth Management, Broking, Insurance etc. High demand for health insurance will continue to grow with economic growth. Consistent rise in Indian equity markets are attracting investors. Robust mutual fund flows and strong momentum in demats will help these non-lending businesses.

* In Defence, despite sharp rise in share prices of some of the companies, the sector can be looked at during dips. Supportive policies, export opportunities and rising local defence production can give boost to the sector. Trump is expected to strengthen military capabilities through procurement or strategic alliances. Expect opportunities in Electronic Warfare, Avionics, Radars, Missiles, UAVs and Fighter Craft.

* In Power and Solar 500GW renewable energy capacity expansion, Green Energy Corridor project, Revamped Distribution Sector Scheme (RDSS), Solar Parks, lifetime high orderbooks and strong demand outlook are  positive for Solar, RE Financers, Power Infrastructure, EPC players, smart meters, T&D segments.

* Capex theme is playing out for hospitals and diagnostics players. RoE expansion can take some time. Clearance of the Biosecure Act opens-up meaningful growth opportunities for Indian CDMO players. US business of key pharma companies to benefit from easing pricing pressures on the generics, key product approvals and subsequent launches.

* In next 6 months, 50-75 bps rate cut can happen in India. For equity segment, domestic flows have show great resilience. Money making in 2025 will not be as straight as in last 4 years. Keep some cash (say 15-20%) in portfolio, 2025 may give that lump sum opportunity.

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