'Given that India underperformed emerging markets by 28 per cent in 2025, the worst performance in over 30 years, the timing of the sharp STT hike could have been better.'
After a year of modest returns, equity investors may anticipate gains of 10-15 per cent in Samvat 2082, which began on October 21. Although valuations have moderated from their peaks a year earlier, they remain above long-term averages, potentially limiting sharp upsides.
The interplay between domestic and foreign capital will shape India's equity markets.
Analysts are warning of growing risks to the market's sustained momentum, and even to the possibility of consolidation at current levels. Domestically, markets are grappling with several challenges, including a slowing economy, as indicated by the latest GDP data for the July-September (Q2) quarter of 2024-25 (FY25), sticky inflation, fluctuations in the rupee, waning consumption, and high interest rates.
'2025 is the year to build a portfolio for the future. Focus this year should be on valuations and visible growth.'
'Just keep investing a steady amount every month irrespective of what the media says about the direction of the market,' advises Jyotivardhan Jaipuria, Managing Director, DSP Merrill Lynch, India.
A combination of strong earnings and economic growth, and hopes of the Federal Reserve ending the rate-hike cycle have pushed gross buying of Indian equities by foreign portfolio investors (IPO) to a new high. In 2023, FPIs have been gross buyers of shares worth Rs 25.5 trillion, the highest ever in a calendar year. FPIs also sold shares worth Rs 23.9 trillion. On a net basis, they were net buyers to the tune of Rs 1.6 trillion, the highest since 2020.
At an aggregate level, the late ace investor's portfolio that was valued at Rs 32,445 crore as on March 31, 2023 is now worth Rs 35,979 crore.
Companies will struggle to maintain and enhance margins
'The good news is that till the time there is growth in gross domestic product, Indian markets will continue to rise.'
'While foreign institutional investor flows are still negative, they will turn positive in the latter part of 2023 as India's resilient growth becomes perceptible.'
The faster-than-expected rise in interest rates by the US Federal Reserve (US Fed) shook global financial markets in early 2022. And now the ongoing war between Russia and Ukraine has lifted commodity prices, with Brent crude oil hitting a 14-year high of $139 a barrel in intraday trade. All these developments have sent the equity markets across the world into a tailspin.
Investors with high risk appetite must stay invested while risk-averse investors can consider profit booking.
'A soft landing of the Indian economy would be a long-term positive for the equity markets.'
Investors more overweight on India compared to other emerging markets says Bank of America Merrill Lynch.
Any market correction, analysts say, would be an attractive entry point for risky assets, which should do well over the medium-to-long term.
The negative aspect about the Budget is that the capital expenditure has been marginally cut to achieve the fiscal deficit target assumptions, and the onus of sustaining investment demand till private capex revives continues to vest with the public sector enterprises, notes Jyotivardhan Jaipuria.
'A time-wise, as well as price correction, so that the market can absorb the gains made over the past 17 months.'
While FIIs have pumped in nearly Rs 17,000 crore, MFs have been net buyers to the tune of Rs 9,000 crore.
The underperformance comes amid liquidity concerns in the non-banking finance companies space and Essel Group default news.
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GEM fund managers more overweight on India than ever before says Bofa-ML report.
'2018 has seen a bi-polar market.' 'Thanks to gains in some key stocks, market returns are positive. But there has been huge wealth destruction in the small and mid-cap space.'
Raising concern about over-dependence of Indian capital markets on foreign institutional investors, eminent banker Deepak Parekh has said that something needs to be done to change this pattern.
Hailstorms may cause Rs 12k-cr crop damage, El Nino a bigger worry.
Axis Bank, HCL Technologies, Maruti Suzuki, NBCC and Union Bank are their top five stock picks.
'The news about the new virus strain in the UK provided them with an opportunity to take money off the table.'
BJP loss could trigger a correction
'The probability of another negative year in 2019 is low.'
'We think FY18 will end with a 10 to 12 per cent earnings growth, but FY19 will see a recovery to over 15 per cent.'
You may invest even at current market levels provided you have an investment horizon of five years or more.
Pharma stocks have performed well after Budget
'Allocate 30% to 35% of your equity portfolio to mid-cap funds and 10% to 15% to small-cap funds.'
Focus on large-caps and ensure that the portfolio is balanced.
'The recent US jobs report has eased fears of a hike in the Fed meeting.'
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