Investing.com — Bernstein says “selectively buy” Indian stocks for 2025, given macroeconomic challenges and earnings shortfalls. The Nifty 50 is projected to touch 26,500 by the end of the year, a return of 12%.
Bernstein said India’s economy may have bottomed, after growing 5% in September and signs of an industrial recovery. While risks to FY26 earnings remain, the brokerage suggests the worst of the “sentiment spoilage phase” is over.
Indian markets faced significant difficulties in 2024, with equities down 9.8% and the rupee depreciating 2.4% during the fourth quarter. Weak GDP data, a lack of earnings and dovish comments from the Fed contributed to the decline.
“India’s economy has slowed, the currency is depreciating, Trump-era volatility may be upon us and China’s policy needs to be watched. Domestic flows have so far been immune to these fundamentals and seem to be investing in India 2200AD, while low quality IPOs continue to attract attention.”
Bernstein draws parallels with 2005, another year of mid-cycle corrections followed by a strong recovery.
The brokerage noted that government capex, which had been declining during 2024, could revive in 2025, boosted by the focus on growth in the upcoming budget. In addition, easing base effects and interest rate cuts are expected to support the recovery.
While uncertainties, including geopolitical tensions and the impact of Trump-era volatility, remain, Bernstein argues that these are not new concerns, opportunities in the China+1 strategy and IT spending could act as potential positives.
Bernstein acknowledges risks to FY26 earnings and has cut its target price-to-earnings multiple to 19.5x two-year EPS. However, he sees limited downside for the Nifty, estimating a worst-case scenario of 22,000.
Bernstein’s measure of selective buying warns against stocks of small and medium-sized companies, which it considers overvalued. Instead, it recommends focusing on large-cap names aligned with structural growth themes.
Bernstein calls for investment ahead of the expected recovery, saying India remains in the early cycle stage, poised for growth in the coming quarters.
