Outlook 2025: Indian equities were buoyant amid a challenging and eventful year with higher volatility. The stock market was volatile due to multiple global events, a slowdown in the economy, tighter liquidity conditions, and lower government spending. Domestic equity benchmarks Nifty 50 and Sensex rose 8.8 per cent and 8.2 per cent, respectively, logging their ninth straight year of gains.
The year also saw standout performances from sectors like IT, which rallied over 23 per cent, and realty, which surged 35 per cent. Within the smallcap and midcap space, companies from the infrastructure, healthcare, and real estate sectors delivered robust returns. Broader economic tailwinds, such as an above-average monsoon and strategic sectoral rotation, supported the uptrend.
According to domestic brokerage Geojit Financial Services, the current environment is favourable for balanced equity investments, with no major global economic issues deterring equities. The global uncertainty surrounding Donald Trump's economic policies and high valuation may impact the stock market in the short term, particularly in emerging markets.
There are no signs of recession, though tapering could influence valuations. A balanced approach, including specific stocks and sectors and investments in gold, silver, and debt instruments, is essential for portfolio stability. We have an optimistic view on a medium-term basis, with caution in the short-term.
The brokerage has maintained a positive view on the Nifty 50 index for 2025 but with caution. "We forecast a base target of 26,300 for December 2025, suggesting a moderate return of 10 per cent year-on-year (YoY) supported by expected earnings revamp from Q3FY25 onwards.
India's real GDP growth is forecasted to rise to seven per cent in FY26 from 6.5 per cent in FY25, suggesting a stable domestic market and a positive outlook. The key challenges include uncertainty in a trade war, moderation in earnings growth, and high premium valuation, which affect short—to medium-term stock performance.
Base Sase: The brokerage values at a forward P/E of 19.5x and assigns a base target of 26,300.
Peak Case: The brokerages values Nifty 50 at a forward P/E of 20.5x to assign a target of 27,650.
Trough Case: The brokerage values Nifty 50 at a low base of 16x to assign a target of 21,600.
Multi-asset strategy: The brokerage's recommended strategy involves maintaining a diversified multi-asset portfolio, allocating 60 per cent to equities, 25 per cent to debt, 10 per cent to gold, and five per cent to cash for seizing new opportunities. “Within the equity portion, the focus should be on large-cap stocks, given that mid-cap valuations have returned to their historical peak ratios of 60 per cent relative to large caps,” said Geojit Financials.
According to the brokerage, seven sectors have been pegged as ‘high growth sectors’ for 2025 with potentially steady returns. The sectors are chemicals, defence, electronic manufacturing services (EMS), fast-moving consumer goods (FMCG), information technology (IT), infrastructure, renewable energy, and textiles.
1.Chemicals: The brokerage anticipates a growth revival starting in H2FY25. If the United States imposes higher tariffs on products from China, Indian manufacturers will likely benefit from a tariff differential. PI Industries, Vinati Organics, Aarti Industries, and UPL are top picks.
2.Defence: Despite recent corrections, the sector valuation is still at a premium. The key reason is the improvement in the long-term order pipeline and likely improvement in execution. The top picks are Bharat Electronics, Astra Microwave Products, Cochin Shipyard, and Hindustan Aeronautics.
3.EMS: The production-linked incentive for large-scale electronics manufacturing has seen investments worth ₹6,887 crore (till June 2023), surpassing the target for FY24. The key players are Kaynes Tech, Dixon Tech, Amber Enterprises & PG Electroplast.
4.FMCG: The FMCG industry valuation has moderated from an expensive range to above the 10-year average. A better demand and a profitability outlook will support valuations. The top picks are HUL, Jyothy Labs, and Tata Consumer Products.
5.IT and MNCs are the key beneficiaries of global capability centres (GCCs). In FY24, GCCs contributed $65 billion to the industry and are projected to reach $100 billion by 2030. Employment is expected to grow from 1.9 million in FY24 to 4.5 million by FY30.
6.Infrastructure: The brokerage anticipates a likely improvement in the overall demand scenario, owing to the robust growth in Kharif foodgrain output and upbeat outlook for rabi crops. A back-ended pick-up in government capex will further boost the scenario. The top picks are NCC, L&T, KEC, and HG Infra.
7.Renewable Energy: By FY29, renewable energy capacity (excluding large hydro) is projected to grow at a CAGR of 19.6 per cent, reaching 320 GW and comprising over 50 per cent of India’s total capacity mix. The top picks are Suzlon, Tata Power, Torrent Power, Waaree Energies, NTPC Green Energy, and Premier Energies.
8.Textiles: In FY24, India's textile and apparel exports, including handicrafts, surpassed $35 billion.~ 28 per cent of these exports were directed to the US. The key players are Welspun Living, Vardhman Textile, Arvind & Trident.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.
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