Indian equities were buoyant amidst a challenging and eventful year with higher volatility. The markets were volatile with multiple global events, a slowdown in the Indian economy, tighter liquidity conditions and delayed government spending. However, a recent cut in CRR is expected to ease the liquidity conditions followed by a pickup in government spending. These two factors are expected to improve overall consumption and pickup in industrial output.
The stock market in 2025 is set to ride on strong economic growth and government efforts to boost infrastructure and digital innovation. Sectors like capital goods, technology, financial services, consumption, and healthcare are expected to shine, with emerging areas such as semiconductors, electronic and manufacturing, renewable energy and electric mobility grabbing more attention.
Capital expenditure by the government till October 2024 stood at Rs 4,66,545 crores, only 42% spent of budgeted Rs 11,11,111 crores for FY25. This compares with ~55% spending in the year ago period. With government stepping up investments in the 2H, sectors such as infrastructure, defence and railways may witness recovery. FMCG, badly hit by urban consumption slowdown, could witness recovery as valuation looks attractive. Besides, with government spending revival and possible interest rate cut in 1HCY25, urban consumption should recover.
IT, which has already recovered from its lows after rate cuts, may do well in 2025 as discretionary spending picks up, provided Trump does not impose any surprise tariffs. Banks may also witness recovery post interest rate cuts resulting in possible pick up in credit growth. Moreover, the recent CRR cut by 50 bps (in two tranches) should boost liquidity and credit growth in the banking sector.
Of course, global events and changes in monetary policies might cause some bumps along the way. That’s why it’s smart to keep a balance—investing in stable large-cap stocks while also tapping into the growth potential of mid- and small-cap companies. A thoughtful mix can help navigate the ups and downs and make the most of what’s shaping up to be an exciting year for equities.
(The author is a senior fund manager, Shriram Mutual Fund)
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