The shares have gone ‘down’. Here’s what 2025 has in store

This report is part of this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Do you like what you see? You can subscribe here

The Indian stock market has not had the best start this year. Fear of high valuation multiples coupled with reduced earnings expectations has led to a steady decline. Nifty 50.

The index has entered correction territory again – a 10% drop – which was last at the end of September.

In fact, so far, the benchmark is now in the red. That’s hardly the norm for investors, though. By my count, the Nifty 50 turned negative on the fifth trading day of the year in seven of the last 10 years.

However, this time is different. Many analysts entered the new year with high valuations and concerns about slowing corporate earnings growth.

It is a far cry from the earlier bullish sentiment that may have preceded the Indian stock market. S&P 500increased by more than 20% for the second year in a row.

Equity strategists at HSBC believe the bullish market is likely to continue.

“As earnings disappoint – consensus (financial year 2025) NIFTY 50 growth estimates cut to 5% from 15% – investors are likely to reassess their positions, capping market gains,” said the bank’s Asia Pacific led by Herald van strategists der Linde in a statement to customers on Thursday. The investment bank downgraded the Indian stock to neutral.

Morgan Stanley noted that last year stocks, for the first time in eight years, performed worse than bonds and gold (which, to be fair, beat most global markets).

“In the long term, we believe equities will lead the way among financial assets and gold will shine among physical assets,” said investment banker Ridham Desai.

Many also believe that Indian stocks, after their long slide, are now ready for a pickup.

“India has bottomed,” Bernstein strategist Venugopal Garre wrote in a note to clients last week. Garre expects economic growth to pick up over the next three to six months and urges investors to anticipate the turnaround. “It is recommended to invest before 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 reduce the fiscal deficit when it unveils its budget in February, which could lower bond yields and lower corporate borrowing costs.

That view is echoed by Citi’s equity strategists. India’s economy is expected to expand by 6.5% this year, driven by a boost in government infrastructure spending, which slowed last year.

“We have a constructive outlook on profitable initiatives following more reasonable market valuations and after 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 by 6.4% in 2024-2025. India’s National Bureau of Statistics released its first forecast on Tuesday Lowest since 2020 When India’s gross domestic product shrank by 5.8% due to the pandemic. The estimate is lower than the Reserve Bank of India’s forecast of 6.6% for the current fiscal year. Here are economists from HSBC and HDFC Bank think about the estimate.

India wants the country’s foreign missions to help promote exports. The Ministry of Commerce of India has requested the Indian Missions increasing market intelligence efforts and identify export opportunities, government sources told CNBC-TV18. Trade heads of Indian missions from 20 major countries will meet for a three-day meeting, organized by the ministry, which will focus on export growth.

Trump’s second term will benefit Indian stocks, says portfolio manager. US President-elect Donald Trump plans to impose high tariffs on China Geopolitical location of India “Trump 2.0 in favor in this era,” according to Kunal Desai, portfolio manager at GIB Asset Management. “Many Indian companies are taking advantage of the fact that customers want to take a dual-sourcing approach to their supply chain,” Desai said.

India is a ‘compounding machine’. Investor interest in India waned in late 2024 as Indian stocks rallied during that period. One portfolio manager, however, remains bullish on the country. He says that dipping into the market is a buying opportunity names three Indian stocks to buy by 2025 (For subscribers only)

Indian stocks started the year sliding. The Nifty 50 the index closed at around 23,500 points, down 1.8% from last week.

The benchmark 10-year Indian government bond yield has been flat this year and traded around 6.76%.

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

Meanwhile, Pulkit Patn, an industry analyst at Goldman Sachs India, said the bank he hopes India’s cement industry is expected to expand in the second half of the year, suggesting that “infrastructure spending is coming back.” Government spending, housing real estate and rural spending will be the biggest part of that investment, and as a result relatively high demand for infrastructure and related materials.