1. What do you make of the stock market correction over the past six months? Please share your views on the impact of massive FII selling and the weakening rupee?
Market valuations reached the upper end of historical bands and have been correcting since September. Government capex momentum—strong over the last few years—slowed due to the disruptions from central and subsequent state elections. Consumption remained weak, causing a near-term drag on earnings growth. Although small and midcaps looked expensive at the start of the year, they continued to outperform large caps by a wide margin. The Nifty Index returned about 8.80%, while mid-cap and small-cap indices gained roughly 23.79% and 26.43%, respectively—a 15-17% performance gap.
We observed a notable factor rotation: following the strong outperformance of Value during the pandemic, Quality is now regaining traction, reflected in the improving performance of higher ROE companies.
2. Where are we headed in 2025 in terms of corporate earnings and economic growth?
The budget projects a realistic nominal GDP growth of 10.1% YoY for FY26, but downside risks to revenue collections exist if growth does not meaningfully recover in FY26. The budget has set an optimistic disinvestment target of Rs 0.47 tn, which would be difficult to achieve, as the government has consistently failed to meet previous disinvestment targets.
The budget has also clearly focused on consumption revival while the pace of capital expenditure growth slows down. The private sector will now have to take the lead in driving investment. The changes in the new tax regime will lead to more disposable income in the hands of the consumer, and thus, is favourable for the consumption-driven sectors. However, discretionary consumption will likely benefit more than non-discretionary consumption.
Despite the recent correction, equity valuations remain high. However, the budget is anticipated to foster growth and strengthen earnings momentum, which could, in turn, help sustain valuations.
3. What are the top three sectoral themes that look attractive for investing at present?
First, emerging markets like India and Southeast Asia offer significant growth potential, driven by rising consumer demand in sectors such as financial services and healthcare.
Second, the energy transition is accelerating, with investments in renewables, electric mobility, and decarbonization gaining strong policy support.
Third, an industrial renaissance is underway, fuelled by global supply chain reorganization and advancements in automation, logistics, and infrastructure.
4. What are your expectations for the equity markets in 2025 across various indices?
Performers: Various themes could come into play. Sectors poised for growth include telecom, benefiting from pricing power; cement, driven by consolidation and price hikes; pharmaceuticals, with contract manufacturing gaining traction; and renewable energy, infrastructure, and technology, supported by clean energy initiatives, government focus, and AI-driven innovation.
Laggards: Sectors with stretched valuations or cyclical headwinds may underperform, particularly on slowing demand.
5. How do you plan to navigate tariff uncertainty as it unfolds? Do you believe we are heading toward an era of deglobalization, which, if it happens, could be detrimental to the equity asset class?
India must navigate a complex landscape to safeguard its economic interests.
Short-Term Advantages: Possible export gains to the U.S. market or favorable energy deals with Russia.
Long-Term Considerations: Maintaining balanced relations with competing powers (China, the U.S., Russia) and mitigating inflationary or supply-chain shocks.
India’s – engagements with China, the U.S., and Russia present both opportunities (manufacturing growth, diversified energy supplies) and challenges (trade deficits, geopolitical balancing).
