Investors in India are bracing for a tough time ahead. Many believe that Indian stocks will likely face another quarter of losses. The mix of slowing economic growth and persistent inflation is impacting corporate profits and discouraging foreign investments.
A recent survey of 22 strategists and fund managers indicated that the benchmark NSE Nifty 50 Index might drop at least 5% in the next three months. This skepticism is compounded by geopolitical tensions, especially with the uncertainties surrounding Donald Trump’s potential second term. Interestingly, the Nifty managed to rise 0.4% after a four-day slump.
Last year, India’s equity market reached impressive new heights, but it is now under pressure. Foreign outflows, driven by concerns over slow consumption growth, have diminished the market value of companies in the MSCI India Index by $556 billion, following a drop of over 13% from its peak in September.
Mohit Khanna, a fund manager at Purnartha Investment Advisers, commented, “The Indian markets are dealing with a lot of uncertainty. This pessimism stems from various local and global developments in 2024.”
Concerns about India’s growth are increasing. The latest government figures estimate a growth rate of only 6.4% for the current fiscal year, which is a steep drop from the 8% average of the past three years. Indicators like vehicle sales are down, and consumer companies are reporting difficult market conditions.
Due to these challenges, HSBC’s strategists have recently downgraded Indian stocks to a neutral stance. They pointed out that investors are likely to reassess their strategies, especially since profit growth estimates for the Nifty 50 have fallen from 15% to just 5% for FY25.
While some survey participants see more negative returns overall, about one-third expect an increase of 10% to 15% for the Nifty in 2025, largely because of ongoing investments from local investors.
The Nifty 50 faced an 8.4% decline last quarter but still achieved an annual increase of 8.8% in 2024, marking its ninth consecutive year of growth.
Looking ahead, Vikas Gupta, chief investment strategist at OmniScience Capital, expressed some optimism, stating, “We are at the beginning of an economic boom.” He believes that interest rate cuts will significantly influence the trajectory of the Indian stock market.
Survey respondents also noted that healthcare and information technology stocks might thrive this year, especially with the rupee trading at record lows. Meanwhile, there is little optimism for the real estate sector, which has surged over 110% in the past two years.
In summary, despite short-term struggles, there are expectations of recovery. Many are waiting for signs of positive earnings growth to adjust their investment strategies. The coming months will be critical as economic conditions evolve.
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Source linkBloomberg, Indian markets, earnings growth, Indian stocks, survey respondents
