Indian stock market set to ride on strong economic growth in 2025

MUMBAI: The Indian benchmark indices in 2025 are set to ride on strong economic growth and government efforts to boost infrastructure and digital innovation, experts said on Monday.

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, said Deepak Ramaraju, Senior Fund Manager, Shriram AMC.

Indian equities were buoyant amid 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,” Ramaraju mentioned.

Capital expenditure by the government till October 2024 stood at Rs 4,66,545 crore.

With government stepping up investments in the second half this fiscal, 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,” Ramaraju explained.

The IT sector, which has already recovered from its lows after rate cuts, may do well in 2025 as discretionary spending picks up, provided US President-elect Donald 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, said experts.

According to Bajaj Broking research team, 2024 has been a remarkable year for Indian equity markets, particularly for the smallcap and midcap indices, which have significantly outperformed.

This stellar performance is attributed to strong domestic liquidity, with domestic institutional investors (DIIs) consistently being net buyers, and heightened retail participation through SIPs. Broader economic tailwinds, such as an above-average monsoon and strategic sectoral rotation, further supported the uptrend.

“Looking ahead to CY25, the smallcap and midcap indices are expected to maintain their positive trajectory. The Nifty Smallcap index, which recently achieved a breakout above multi-year resistance levels, is projected to advance to 22,700, while the Nifty Midcap index is anticipated to reach 67,700,” said the research team.

These projections are bolstered by a robust domestic economy, pro-growth policies in the Union Budget, and anticipated rate cuts of 75–100 bps by the RBI, creating favourable conditions for sustained growth in these segments.

--IANS

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