Daily Voice: This fund manager believes these 4 sectors are likely to gain prominence in 2025

Yes, it is time for caution in the equity market. In the global markets there is a lot of economic as well as policy uncertainty with ballooning debt in the US and lack of clarity on Donald Trump’s policies. Even in India the economic growth has slowed down, and rate cuts have been delayed due to spike in inflation.

With global and domestic uncertainties, maintaining a balanced approach is key. Historically, markets tend to consolidate or move sideways as participants await clarity on fiscal policy, particularly during the Union Budget period. However, while the Budget may provide direction, the broader trajectory will also depend on external factors like global monetary trends and commodity prices.

Which factors make you concerned about the equity markets in 2025?

The primary concerns for 2025 include geopolitical tensions impacting global supply chains, policy uncertainty, slow earnings growth due to elevated interest rates, persistent inflationary pressures. Slow capex and rising crude oil prices could further strain margins, particularly in sectors dependent on fuel and imports. Additionally, volatility in foreign portfolio flows and continued underperformance in corporate earnings may weigh on sentiment.

Do you expect the US Federal Reserve to deliver its final interest rate cut in December before pausing?

It’s possible that the US Federal Reserve could deliver a final interest rate cut in December, but this decision will likely hinge on evolving economic data. If inflation continues to moderate and economic growth shows further signs of slowing, the Fed may decide to make a final cut to support the economy. However, there’s also a strong likelihood that the Fed might choose to pause after assessing the cumulative impact of previous rate changes, as monetary policy operates with a lag. Balancing inflation control with economic stability will be the Fed's primary consideration.

Where do you plan to focus your attention in terms of sectors in 2025??

In 2025, sectors like domestic consumer durables, IT, capital markets, and government capex linked sectors are likely to gain prominence. Consumption-driven industries could benefit from stable demand, IT is seeing a persistent trend due to global recovery while capital markets continue to get strong flows from robust retail mandates. If the government catches up on capex which has been lacklustre this year, we could see strong resurgence in linked sectors.

Do you expect the size and number of IPOs in 2025 to surpass those of 2024 in both the mainboard and SME segments?

The IPO market's performance will depend heavily on market sentiment and liquidity conditions. While the groundwork for several IPOs seems strong, surpassing 2024 will require stable macroeconomic conditions and resilient investor appetite. In the SME segment, digital and tech-oriented companies could lead the charge, given the ongoing push toward innovation and digitization.

Which sectors are expected to drive earnings growth during the third-quarter earnings season, which will begin next month?

For the upcoming earnings season, banking and financial services are expected to lead due to healthy credit growth and improving asset quality. IT services could also show signs of recovery as clients adapt to new technology spending cycles. Additionally, consumer durables, auto and auto ancillary sectors may benefit from festive season demand and easing input costs. However, export-driven industries may remain under pressure due to global economic uncertainties.

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