Mumbai, India – February 18: The Indian stock market is expected to see more ups and downs in the coming months. However, analysts predict that things may start to improve in the second half of 2025.
Emkay Institutional Equities believes the Nifty index could hit 25,000 by December 2025. This growth is supported by better consumer spending, a rebound in lending, and more government spending on welfare programs.
They are optimistic about sectors like Discretionary spending, Real Estate, and Healthcare. These areas show strong demand potential. On the other hand, sectors like Industrials, IT, and Energy are now viewed as neutral. Financials, Staples, and Materials are seen as weaker investments due to concerns about their valuations and ongoing challenges.
In the next few quarters, a revival in consumer spending is expected. This will be fueled by increased hiring in the IT sector, better cash flow, and a rise in retail lending. Government initiatives, especially those aiding women and rural communities, will also help boost spending in these areas.
India’s capital expenditure growth has been impressive, averaging 31% per year from FY21 to FY24. However, this is expected to slow down to 10-13% due to the upcoming elections. Looking ahead, a rebound is forecasted for FY26 as policies become clearer. The green energy sector remains promising amidst worries about capital-heavy investments.
Foreign investment trends are likely to stabilize by Q2CY25. Analysts point to factors such as steady valuations, a peak in the U.S. Dollar Index, and easing issues with the rupee. Additionally, the Reserve Bank of India’s efforts to inject liquidity may support domestic stocks, particularly in the banking and financial services industry.
As the cycle of earnings downgrades comes to an end, analysts note that earnings for the fiscal year 2026 are expected to grow at a mid-teen rate. This growth will likely come from sectors like Financials, Metals, and Energy.
Nirav Sheth, CEO of Institutional Equities at Emkay, shares that markets often react strongly to changes, and the current volatility reflects this tendency. He emphasizes India’s solid economic fundamentals, including a manageable current account and fiscal deficit, along with a supportive monetary policy.
Seshadri Sen, Head of Research at Emkay, insists that despite facing some short-term challenges, the long-term investment potential in India remains strong, especially in sectors poised for growth.
In summary, while the market may face short-term fluctuations, there’s optimism for recovery in the latter half of the year. Investors should be thoughtful and strategic in their choices, focusing on individual stocks rather than broader trends.
