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Given the muted spending by the government in April-Sept 2025 (So far, the government has spent Rs.4.60 lakh crore, which is 42% of budgeted Rs.11 lakh crore for FY25 compared to the spent of 55% during the corresponding period last year), experts believe that the government’s capex will focus on building infrastructure, boosting manufacturing and creating sustainable energy in the rest of the year.
While there is no major reason for the equity markets to head south, government capex and geo-political uncertainties will determine the course of market in 2025, believe experts.
Let us hear from our market experts to know their equity outlook for 2025:
Deepak Ramaraju, Senior Fund Manager, Shriram Mutual Fund
What can happen in 2025?
Overall, the global GDP growth improving to 3.3% in 2025, with India leading at 6.9%.
Resilient domestic demand in India and Indonesia, along with China’s stimulus measures, supports strong growth in Asia. Global inflation is expected to ease further though geopolitical risks remain a concern.
During the last year, gold gained around 30% due to global uncertainties but is expected to remain rangebound in 2025. While silver, driven by industrial demand from sectors like electronics, renewable energy and electric vehicles may outperform gold this year.
Indian equities navigated a volatile year amid global and domestic challenges such as tighter liquidity and delayed government spending. However, a cut in Cash Reserve Ratio (CRR) by RBI, improved weather conditions and expected government spending in the second half of FY25 should boost consumption, industrial output and rural demand. The RBI has revised FY25 GDP growth to 6.6%, with recovery to 7.1% expected in April-Sept 2025.
Sectors that can do well
This year, FMCG, which has been impacted by urban consumption slowdown, could see a revival. It will be supported by attractive valuations and improved spending conditions.
IT and banks may benefit from rate cuts, boosting credit growth and discretionary spending.
Fund categories you should consider
More parts of the economy to do well as there are opportunities in majority of the sectors in the Indian economy. Government policies will be aimed at increasing the share of manufacturing in GDP which means that manufacturing sector is going to be an important sector for the upcoming year.
Karan Doshi, Fund Manager Equity, LIC Mutual Fund
What can happen in 2025?
December witnessed a rise in inflation, which curbed the customer spending. Further, the elections and monsoon slowed government capex. However, a robust recovery is anticipated in Oct 2024-March 2025, as new projects gain momentum.
India’s economy is poised for a new growth cycle. The global shift toward supply chain diversification presents India with an opportunity to emerge as a key player, thanks to its young workforce, strategic location and improving infrastructure.
India’s demographic advantage, rising productivity and globalization trends will support structural growth and the government’s initiatives in infrastructure, digitalization and manufacturing further bolster the medium-to-long-term outlook, making India a strong contender in the global economy.
Sectors that can do well
Sectors that may benefit from India’s structural growth trends, such as infrastructure, manufacturing, and consumption-driven sectors are worth considering for the medium to long term.
Fund categories you should consider
The fund recommendation will depend on the age factor, risk appetite, mindset and goals of the investment. Broadly, an investor can go for large cap funds, large and mid cap funds or the multi/flexi cap funds because these funds have a diversified approach to deal with the portfolio. Further, the investors with less risk appetite can also opt for aggressive hybrid funds.
R Janakiraman, CIO, Franklin Templeton Mutual Fund
What can happen in 2025?
The US economy remains robust, with third quarter of calendar year 2024 GDP growth at 2.8%, supported by consumer spending, exports and government expenditure. Favorable tax policies and reduced regulations enhance corporate profit outlooks despite tariff challenges.
India’s April-Sept FY25 GDP growth slowed to 5.4%, the lowest in two years. This slowdown is expected to be temporary, attributed to elections and government formation. Recovery in Oct 2024 – March 2025 is anticipated as the government pushes to meet budgeted spends. Rural demand shows green shoots, supported by increased government spending while urban demand softens.
The consensus estimates for Nifty’s FY25 earnings growth have been revised to 5-10%, down from 15%. As a result, FY26 growth is projected at 13-15%.
Sectors that can do well
Banks and the financial sector look promising as the valuations versus growth equation is favorable.
Fund categories you should consider
Investors should consider diversified equity funds and rebalance their portfolio to take advantage of volatility ahead.
Satish Mishra, fund manager, Tata Mutual Fund
Talking about the performance of the industry in December, Satish said that December was a volatile month for Indian equity markets. It was driven by global and domestic factors. The US Federal Reserve cut rates by 25 bps but highlighted higher inflation risks, tempering expectations for rate cuts in 2025.
While on the domestic front, weaker GDP growth and the RBI’s downward revision of its growth forecast dampened sentiment.
For January, key triggers may include quarterly earnings starting mid-month and anticipation around the Union Budget, focusing on fiscal policies and government spending.
Trump’s policy actions, the US stance on inflation versus growth and geopolitical tensions will also play a major role in determining the performance of the markets.
Sectors that can do well
Fund categories you should consider
Medium-term outlook for Indian equity markets remains positive, supported by a strong economic growth trajectory and policies aimed at boosting manufacturing and investments. Midcaps and small caps, with their higher earnings growth potential, are likely to outperform over the next three to five years as India’s investment-to-GDP ratio rises.
