"Given the market and investors' appetite for newer businesses, we see no reasons why we won’t see line ups of IPOs in 2025," Pankaj Pandey, Head of Research at ICICI Direct said in an interview to Moneycontrol.
According to him, new age business models are likely to drive the IPO boom again in 2025.
He is bullish on auto sector. "With the tailwinds from premiumisation play and EV adoption at inflexion point will also drive opportunities for the ancillaries," said Pankaj Pandey with more than 2 decades of experience in the Indian equity markets.
Should the government be aggressive in spending in the rest of FY25?
We highlight that the Centre’s capex contracted by nearly 15% on-year at Rs 4.7 lakh crore in April-October 2024. To meet the FY25 budget estimate of Rs 11.1 lakh crore, the Centre needs to incur a capex of ~Rs 1.3 lakh crore per month during November-March FY25. Thus, there is indeed a need to increase the spending aggression. Our sense is that we might achieve up 95% of the budget estimate, which in our view, will be a decent.
Will there be a tougher global environment with Donald Trump?
While there are talks of tariffs under Trumps administration, we believe Indian companies will be largely less affected under the same.
Nonetheless, with likely tax cuts potential under new regime, there will rather be some positive outlook in near term as it also coincides with IT companies clients’ cost planning period alongwith rate cut cycle. Thus, while FY25 is likely to witness a mid-single digit revenues growth, FY26 could see double-digit revenue growth for the sector. This will be largely led by increased discretionary spends in key clients’ segments such as BFSI, Retail and Telecom.
What sectors have you spotted for 2025?
Capex is one underlying scheme which is very strong with government capex growing at 20%+ CAGR over last 5 years. While we saw some slowdown in H1FY25 amid elections, we believe it has structural legs to it. Infact, we are we selectively positive in space such as EPC, capital goods and cement amidst huge potential ahead.
Banking looks attractive given lean balance sheet and majority of bad loan provisioning behind us. Banks have entered a good credit growth cycle which on one hand will lead to business growth and provide operating leverage while on the other hand would lead to strong ROA’s going ahead. Auto is another sector we are bullish, with the tailwinds from premiumisation play and EV adoption at inflexion point which will also drive opportunities for the Ancillaries.
Do you see any major threat for Indian equities? Will there be record high spree continuing for the equity markets in 2025?
Global geopolitical tensions remain a major threat. While, the equity markets, so far, have not shown major reactions but given that there are bunch of near escalations risks, one cannot rule out this risk ahead. Having said that, threat to equity market at any given point of time is always absent and becomes visible only after it occurs.
The overarching variable to forecast remain that how much correction can happen and will we be able to buy at that correction. Historically, markets have seen 10-12% correction multiple times and the same was witnessed recently as well in September/October 2024. We believe that the markets to remain supportive in the year 2025 with minor corrections like 10-15% occurring in the intermittent.
Do you see flood of IPOs in 2025 in India?
Given the market and investors’ appetite for newer businesses, we see no reasons why we won’t see line ups of IPOs in 2025. New age business models are likely to drive the IPO boom again in 2025.
What is reading on the RBI policy and commentary? Do you expect the repo rate at 5.5-5.75 percent by the end of 2025?
The wordings of the policy seem hawkish as RBI has increased its inflation forecast by around 20-30bps across period till Q1FY26 and maintained GDP forecast above market expectation with a sharp pick-up in growth in Q4FY25 at 7.2%. However, the CRR cut, with 2 members now favouring a rate cut as against 1 in October, projecting Q2FY26 inflation at 4.0% and highlighting on correctly timing monetary policy actions indicates that the MPC is moving towards the first rate cut in February while keeping market expectations low for the same.
We expect RBI to cut rates by 75bps in the forthcoming rate-cut cycle. We consider average inflation for FY26 at 4.5% and comfortable real rate at around 1.25%. The same gives projected Repo rate at 5.75% as compared to current rate of 6.5% indicating a total rate cut of 75bps.
Is the full year (FY25) growth of 6.6 percent achievable?
We expect H2 growth to be close to 7% (from 6% growth in H1). That view in turn is premised on some recovery in Industrial value add in Q3 on the back of soft global commodity prices and some sector specific tailwinds that marred performance in Q2 (as RBI has pointed as well). Moreover, agriculture growth as well as government spending growth should be stronger, and high frequency data points to pick up in momentum.
Therefore, at 6.5%, growth may be largely in line with RBI projection with marginal downside bias.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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