We are optimistic about its performance. indian stock market in 2025, although we advise caution in the short term. The optimism comes as the world economy is projected to maintain its strength at a decent rate of plus 3% in 2025. The G20 economies are also expected to grow at a healthy rate of 2.6% in 2025, in line with 2024, indicating no recessionary pressures or structural weaknesses in the short to medium term. This view is further supported by the consolidation of hyperinflation over the last three years (2022-2024). Additionally, anticipated interest rate cuts are expected to ease future economic headwinds. There is also growing confidence that the world will experience greater peace compared to the high geopolitical risks seen in Eastern Europe and the Middle East over the past two years. Moreover, improvement in metals and crude oil prices is positive for India, as it helps in reducing the fiscal deficit.
Generally the environment is not anti-equity. However, caution is warranted given high valuations in countries such as the US, India, Taiwan and Japan, as well as economic slowdown in regions such as China and India. Furthermore, currently, a major concern is the appreciation of the USD, which is expected to continue in the short to medium term due to the impact of the recession. This is expected to reduce financial liquidity and slow emerging markets growth, which may lead to consolidation in valuations going forward.
Another source of uncertainty is the impact of ‘Trumponomics’ on tariffs, which could bring further volatility to emerging markets. However, it could also create optimism for India if tariffs are not imposed on domestic products that provide a competitive advantage. Nevertheless, there are fears that India may also have to fear a fight on a product-by-sector basis in the future, as Trump will look to negotiate on a case-by-case basis to secure trade concessions for the US. . Anyway, these are currently unknown risks that will be amplified over the next 2-3 quarters, adding to the current uncertainties.
In short, the current environment supports a balanced approach to equity investments, with no major global economic issues other than uncertainties related to tariff policies, valuations and tapering. Uncertainty over Trump’s economic policies and high valuations could weigh on stock markets in the short term, especially in emerging markets. There are no signs of a slowdown, although the cuts could impact valuations. We suggest a balanced portfolio, comprising investments in specific stocks and sectors as well as gold, silver and debt instruments, which brings the necessary stability in the holdings. Our outlook is optimistic on a medium to long term basis with caution in the short term.
portfolio strategy
The strategy is to have a multi-asset portfolio in which 60% is in equities, 25% in debt, 10% in equity. Sleep and 5% cash to manage new opportunities. The focus should be on equity big hatsAs an evaluation of middle caps Large-cap ratios are back to their historical peak of 60%. Some of the sectors in focus are chemicals, defence, renewable energy and EMS but most of them are trading at premium valuations. Nevertheless, these high valuations are likely to persist in the medium to long term as they are likely to grow at a good rate, suggesting a strategy to buy on dips.
Additional opportunities lie in private large banks and infrastructure, which benefit from stable asset quality and reasonable valuations compared to long-term averages. The favorable climate and market conditions projected in 2025 present a contrarian bet given the FMCG sector has underperformed over the past two years. The textile sector also appears promising due to the China+1 strategy, turmoil in Bangladesh and falling input prices. Cotton and non-cotton materials. Indian textile companies have been investing in capacity expansion for the last 2-3 years, which may yield positive results in the future.
(The author is Head of Research, Geojit Financial Services)
Disclaimer: The above views and recommendations are those of individual analysts or broking companies, and not of Mint. We recommend investors to check with certified experts before taking any investment decision.
