Stocks have “bottomed.” This is what 2025 has in store for us

This report is from this week’s CNBC ‘Inside India’ newsletter, delivering timely and insightful market news and commentary on the emerging powerhouse and the big companies behind its meteoric rise. Do you like what you see? You can subscribe here.

The Indian stock market has not had the best start to the year. Fears of elevated valuation multiples coupled with expectations of slashed earnings have led to a steady decline in the ingenious 50.

The index has now re-entered correction territory (a 10% drop) from its most recent high in late September.

In fact, so far this year, the benchmark is now in the red. However, this is not something out of the ordinary for investors. By my calculations, the Nifty 50 has turned negative on the fifth trading day of the year in seven of the last 10 years.

It is a far cry from the bullish sentiment of yesteryear that the Indian stock market would get ahead of the S&P 500which increased more than 20% for the second consecutive year.

HSBC equity strategists believe the sour mood gripping markets is likely to continue.

“As earnings disappoint (consensus has lowered growth estimates (for fiscal 2025) for the NIFTY 50 from 15% to 5%), investors will likely reassess their positions, capping market returns.” , the bank’s Asia Pacific strategists led by Herald van der Linde said in a note to clients on Thursday. The investment bank downgraded Indian stocks to neutral.

Morgan Stanley noted that last year stocks, for the first time in eight years, performed worse than bonds and gold (which, to be fair, outperformed most global markets).

However, many, including the Wall Street bank, believe that Indian stocks, after their long decline, are now poised for a comeback.

“India has hit rock bottom,” Bernstein strategist Venugopal Garre wrote in a note to clients last week. Garre expects economic growth to rebound in the next three to six months and urges investors to get ahead of the recovery. “It is suggested to invest before the recovery,” he added. Bernstein expects the Nifty 50 to end the year at 26,500, up 13% from current levels.

Morgan Stanley says the central government is likely to reduce the deficit in February when it reveals its budget, which could reduce bond yields and benefit listed companies with lower borrowing costs.

Citi equity strategists echo this view. They expect the Indian economy to expand 6.5% this year, driven by a boost in government infrastructure spending, which was in the doldrums last year.

“We have a constructive outlook on equity returns given the market’s more reasonable valuations after recent corrections,” Citi’s Surendra Goyal said in a note to clients. The investment bank also expects Nifty to end the year at 26,000, up 10.5%.

Indian authorities expect their economy to grow 6.4% in fiscal year 2024-2025. India’s National Bureau of Statistics provided its first advance forecast on Tuesday, the lowest since 2020 when India’s gross domestic product contracted by 5.8% due to the pandemic. The estimate is lower than the Reserve Bank of India’s projection of 6.6% for the current fiscal year. This is what economists at HSBC and HDFC Bank think about the estimate.

India wants the country’s missions abroad to help boost exports. The Indian Ministry of Commerce has asked Indian missions to increase market intelligence efforts and identify export opportunities, government sources told CNBC-TV18. Trade heads of Indian missions in 20 key countries will meet for a three-day meeting, organized by the ministry, that will focus on increasing exports.

Trump’s second term will benefit Indian stocks, says portfolio manager. US President-elect Donald Trump’s plans to impose heavy tariffs on China India’s geopolitical positioning “favorable in this Trump 2.0 era,” according to Kunal Desai, portfolio manager at GIB Asset Management. “Several Indian companies are taking advantage of customers looking to adopt a dual-sourcing approach in their supply chain,” Desai said.

India is a “capitalization machine.” Investor interest in India waned at the end of 2024 due to a pullback in Indian stocks during that period. However, one portfolio manager is optimistic about the country. The market decline is a buying opportunity, he says, and Name three Indian stocks to buy by 2025. (For subscribers only)

Indian stocks started the year falling. He ingenious 50 The index closed around 23,500 points, a drop of 1.8% from last week.

The benchmark 10-year Indian government bond yield has remained stable so far this year and has been trading around 6.76%.

On CNBC TV this week, BNP Paribas head of Indian equities Abhiram Eleswarapu believes Indian markets are going through “a soft phase” right now because valuations are at a high level. However, this “shallow correction” could be coming to an end and markets could return a single high digit from March until the end of the year, Eleswarapu said.

Meanwhile, Pulkit Patn, India industrial analyst at Goldman Sachs, noted that the bank wait India’s cement industry will expand in the second half of the year, suggesting that “infrastructure spending is coming back.” Government spending, residential real estate and rural spending will make up the majority of such investment, resulting in relatively strong demand for infrastructure and related materials.