Outlook 2025: Insights on India’s Stock Market and Nifty 50’s Modest Upside
The Indian stock market in 2025 holds cautious optimism despite appearing a bit expensive at the index level. However, stock-specific opportunities are expected to remain abundant, says Dhiraj Relli, MD & CEO of HDFC Securities. He predicts that large-cap indices will offer better risk-adjusted returns compared to mid-cap and small-cap indices.
In a recent interview with Livemint, Relli also highlighted the conditions under which foreign portfolio investors (FPIs) are likely to re-enter the Indian market, such as improved corporate earnings growth.
Key Sector Insights
According to Relli, sectors like Chemicals, Autos, and Consumer currently show high valuations compared to their earnings expectations over the next few quarters. This creates opportunities for selective investments while maintaining caution.
Reflecting on 2024: A Year of Resilience
The benchmark indices, Nifty 50 and Sensex, achieved nearly 10% growth in 2024, despite a 10% correction from September highs. Meanwhile, mid-cap and small-cap indices outperformed, with gains of 25% and 29%, respectively.
Several factors drove this performance:
- Robust GDP growth.
- Resilient corporate earnings.
- Moderating inflation.
Sectors such as defense, healthcare, consumer durables, transportation, and automotive recorded impressive gains, while banking grew moderately at 6%.
The Path Ahead for 2025
Entering 2025, high valuations remain a challenge. With Nifty earnings projected to grow at just 10% in FY25—down from an impressive 18%+ over the past three years—the market seems set for modest upside potential.
While index valuations may appear expensive, stock-specific opportunities are expected to keep emerging, making 2025 an exciting year for strategic investors.
Advice for Investors
Dhiraj Relli offers some actionable tips for navigating the market in 2025:
- Review Asset Allocation: Ensure your portfolio aligns with your original plan. If equities have exceeded the planned share, consider booking profits.
- Trim Overvalued Stocks: Avoid holding stocks that have surged beyond their intrinsic values.
- Exercise IPO Caution: Don’t get carried away by the IPO mania; evaluate opportunities carefully.
