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?
The recent stock market correction has been driven by multiple macroeconomic factors, including aggressive foreign institutional investor (FII) selling, concerns over global liquidity tightening, and a weakening rupee. FIIs have been net sellers due to higher US interest rates and geopolitical uncertainties, leading to capital outflows from emerging markets like India. This pressure has resulted in market volatility, especially in small-cap stocks, which previously witnessed a sustained rally.
A weakening rupee further exacerbates the situation, as it increases import costs and inflationary pressures, potentially impacting corporate margins. However, India’s long-term growth story remains intact, with domestic institutions absorbing some of the FII outflows.
Additionally, the Union Budget 2025’s focus on infrastructure and manufacturing could support a recovery. While valuations in some sectors have turned attractive post-correction, investors should remain cautious and prioritize quality stocks with strong earnings visibility. Market volatility is likely to persist, but long-term investors can selectively accumulate fundamentally strong Companies in this phase.
2. Where are we headed in 2025 in terms of corporate earnings and economic growth?
India’s economic growth in 2025 is expected to be stable, albeit slightly moderated, with GDP growth projected at around 6.6%, reflecting a balanced approach between fiscal prudence and investment-driven expansion. The government’s focus on infrastructure development, manufacturing incentives, and digital transformation will support long-term growth.
Corporate earnings should see a steady recovery, supported by robust domestic consumption, easing input cost pressures, and continued policy support for key industries. Sectors such as banking, capital goods, pharmaceuticals, and IT services are poised for stable earnings growth, while export-oriented sectors may face near-term headwinds due to global trade uncertainties.
However, external factors such as interest rate trends in the US, China-US trade war, geopolitical risks, and inflation trajectory will influence investor sentiment. While earnings growth should outpace broader economic growth, valuations need to be supported by actual earnings performance. Investors should remain selective, focusing on quality businesses with strong balance sheets and execution capabilities.
3. What are the top three sectoral themes that look attractive for investing at present?
IT and Digital Transformation – The IT sector remains a compelling investment theme despite short-term global uncertainties. The increasing adoption of AI, cloud computing, and cybersecurity solutions continues to drive long-term growth. With global enterprises prioritizing digital transformation, Indian IT services firms remain well-positioned for sustainable demand.
Defense and Manufacturing – India’s policy push for self-reliance, along with rising defense spending and supply chain diversification, makes this sector attractive. The Modi-Trump meeting has reinforced the potential for U.S.-India collaboration in defense manufacturing, leading to new growth opportunities.
Pharmaceuticals and Healthcare – With rising healthcare spending, strong global demand for generics, and India’s growing role in Active Pharmaceutical Ingredients (APIs), the pharma sector remains a defensive play. The government’s policy focus on domestic drug manufacturing and healthcare infrastructure further enhances the sector’s investment potential.
4. What are your expectations for the equity markets in 2025 across various indices?
The outlook for Indian equity markets in 2025 remains cautiously optimistic, with volatility persisting due to global macroeconomic factors. The Nifty and Sensex should witness steady gains, driven by corporate earnings growth, infrastructure spending, and a supportive policy environment. However, valuations remain a concern, particularly in certain pockets of the market.
Large-cap indices like the Nifty 50 and Sensex are likely to provide moderate returns, supported by blue-chip stocks with stable earnings. Mid-cap and small-cap indices could see higher volatility, with select companies offering strong growth potential but requiring careful stock selection.
Sectoral trends will play a crucial role in determining market movements. Financials, manufacturing, and IT could lead the rally, while high-beta sectors may experience intermittent corrections. External risks, including the trajectory of U.S. interest rates and FII flows, will be key market drivers. Investors should maintain a disciplined approach, focusing on quality companies with robust fundamentals.
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?
Navigating tariff uncertainty requires a diversified and strategic investment approach. Given the recent Modi-Trump meeting and U.S. policies favoring protectionism, supply chains are undergoing significant shifts. However, this also presents opportunities for India, particularly in defense, technology, and manufacturing, as global firms seek alternatives to China.
While concerns about deglobalization persist, it is unlikely to completely derail economic growth. Instead, we may witness a restructuring of global trade patterns, where regional trade agreements and bilateral deals become more prominent. For India, this could mean greater self-reliance, increased domestic production, and incentives for industries such as electronics manufacturing, defense, and renewable energy.
From an investment perspective, staying agile and focusing on sectors that benefit from geopolitical shifts—such as domestic manufacturing and infrastructure—will be key. While global trade disruptions may create short-term volatility, long-term opportunities remain intact for companies with resilient supply chains and strong domestic demand tailwinds.
