As corporate profitability and foreign flows were negatively impacted by a slowdown in economic development and sticky inflation, investors anticipate that Indian equities would report more losses in the upcoming quarter.
In an informal survey by Bloomberg earlier this month, most 22 strategists and investment managers predicted that the benchmark NSE Nifty 50 Index would likely decline by at least 5% over the three months leading up to March. Local equities face additional challenges due to worries about international tensions during Donald Trump’s second term in office.
Fears of declining demand have caused foreign withdrawals, which have put pressure on India’s almost $5 trillion equities market, which reached many record highs last year. The MSCI India Index plummeted more than 13% from a peak in September, resulting in a $556 billion drop in the total market value of firms included in the index.
According to Mohit Khanna, a fund manager of Purnartha Investment Advisers Pvt., which oversees assets worth over $250 million, “Indian markets are navigating a bout of uncertainty.” “Several domestic and international events in 2024 are to blame for the pessimism, which will immediately affect local shares.”
The latest official data indicates that India’s GDP would grow 6.4% in the current fiscal year, much less than the 8% average of the previous three years, raising concerns about the country’s growth aspirations. December saw a decline in car sales, and consumer firms have noted difficult market circumstances.
After consensus lowered FY25 profit growth projections for the Nifty 50 to 5% from 15%, HSBC Holdings Plc. Strategists, including Herald van Der Linde, downgraded Indian equities to neutral last week, stating that investors will probably reassess their positions.
A third of the poll participants anticipate a 10% to 15% increase in the Nifty 50 gauge in 2025, even though some envision negative returns for the benchmark on a full-year basis. This is primarily due to ongoing inflows of capital from local investors.
Despite its 8.4% decline last quarter, the Nifty 50 managed to cap an 8.8% annual gain in 2024—its ninth consecutive year of gains.
According to Vikas Gupta, chief investment strategist at Mumbai-based OmniScience Capital, “If we take a step back from the near term, we are at the inflection of an economic boom.” He predicts a more than 10% increase in local equities. “Interest rate reductions will determine the Indian stock market’s overall trajectory.”
Survey participants also anticipate that information technology and healthcare equities, which benefited from the record-low rupee, will see significant gains this year. Following the sectoral gauge’s more than 110% increase over the previous two years, none of the 22 respondents expressed optimism about real estate.
At a conference on Thursday, Dong Chen, chief Asia strategist at Pictet Wealth Management, stated, “Once earnings growth momentum turns positive, we are looking for an opportunity to upgrade our position.” Chen had a neutral allocation in India despite not participating in the study.
