Shares have ‘bottomed out’. Here’s what 2025 brings us

This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the up-and-coming powerhouse and the big companies behind its meteoric rise. Like what you see? You can subscribe here.

The stock market in India did not have the best start this year. Fears of high valuation multiples along with lowered earnings expectations have led to a steady decline for A great 50.

The index has now re-entered correction territory – down 10% – from its last high in late September.

In fact, year-to-date, the benchmark is now in the red. However, this is not uncommon for investors. By my count, 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 previous sentiment that the Indian stock market will race ahead S&P 500which has grown by more than 20% for the second year in a row.

Equity strategists at HSBC believe the gloomy mood gripping the markets is likely to continue.

“The earnings were disappointing – the consensus was reduced [financial year 2025] growth estimates for the NIFTY 50 from 15% to 5% – investors are likely to reassess their positions, limiting 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 neutral.

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

Still, many, including a Wall Street bank, believe Indian stocks, after a long slide, are now ripe for the picking.

“India has bottomed out,” Venugopal Garre, strategist at Bernstein, wrote in a note to clients last week. Garre expects economic growth to accelerate in the next three to six months and urges investors to get ahead of the turnaround. “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 cut the deficit in February when it publishes its budget, which could lower bond yields and benefit listed companies from lower borrowing costs.

This point of view is also represented by equity strategists at Citi. They expect India’s economy to expand by 6.5% this year, boosted by increased government spending on infrastructure, which was in a jam last year.

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

Indian authorities expect its economy to grow 6.4% in the fiscal year 2024-2025. India’s National Bureau of Statistics gave its first advance forecast on Tuesday, lowest since 2020 when India’s gross domestic product fell 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. Here’s what economists from HSBC and HDFC Bank say consider the estimate.

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

Trump’s second term will benefit Indian stocks, says portfolio manager. US President-elect Donald Trump’s plans to impose high tariffs on China do Geopolitical positioning of India “favorably in this era of Trump 2.0,” according to GIB Asset Management portfolio manager Kunal Desai. “A number of Indian companies are taking advantage as customers want to access dual sourcing in their supply chain,” Desai said.

India is a “stacking 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 remains bullish on the country. A market decline is a buying opportunity, he says, and names three Indian stocks to buy for 2025 [For subscribers only]

Indian stocks started with a decline. The A great 50 the index closed around 23,500 points, which is a drop of 1.8% from last week.

The benchmark 10-year Indian government bond yield has remained unchanged so far this year, trading around 6.76%.

On CNBC TV this week, BNP Paribas head of Indian equities, Abhiram Eleswarapu, believes that Indian markets are currently going through a “soft phase” as valuations are at a high level. However, this “shallow correction” may be ending, and the markets could return high single digit numbers from March until the end of the year, Eleswarapu said.

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