Looking ahead to 2025, Vijay Bharadia of Wallfort PMS believes key growth themes will include data centers, renewable energy, infrastructure, manufacturing, and healthcare, particularly hospitals. "These sectors are positioned for significant growth, driven by rising demand and increasing government capital expenditure (capex)," he said in an interview with Moneycontrol.
In 2024, both the Sensex and Nifty posted strong returns of around 13%. However, the Managing Parter & CIO believes replicating or exceeding this in 2025 will be challenging. "We could see the Indian equity markets consolidating," said the seasoned investment professional with over two decades of experience in the financial services industry.
What are the top five themes for 2025?
2024 has been a strong year for Indian equity markets, with several sectors delivering impressive returns. Looking ahead to 2025, I believe key growth themes will include data centers, renewable energy, infrastructure, manufacturing, and healthcare, particularly hospitals. These sectors are positioned for significant growth, driven by rising demand and increasing government capital expenditure (capex). This macroeconomic outlook aligns well with India’s long-term development goals, presenting a positive future for these industries.
Do you expect the equity market to perform better in 2025 than in 2024? Does that mean a 10-15 percent return is possible?
In 2024, both the Sensex and Nifty posted strong returns of around 13%, a remarkable performance. However, I believe replicating or exceeding this in 2025 will be challenging. Achieving returns of 10-15% might be difficult, and we could see the Indian equity markets consolidating.
Currently, global markets appear to be trading at more attractive valuations than Indian stocks, which could lead to some foreign capital shifting away from India. That said, I’m not bearish on the Indian markets. While it may be hard to match the extraordinary performance of 2024, I still expect Indian markets to perform well overall. We could see stock and sector-specific rallies, with certain industries continuing to thrive. While the growth pace may be slower than last year, the outlook remains positive.
What are the top five risk factors for the equity market in 2025?
Investors should be cautious of several key risks in 2025. First, monetary policy changes, especially from central banks like the Federal Reserve, could raise interest rates, increasing borrowing costs and putting downward pressure on stock prices. Second, inflation remains a concern. Persistent inflation could erode consumer purchasing power and corporate earnings, possibly prompting tighter policies.
Third, geopolitical risks, including conflicts and trade disputes, could create market instability. A global economic slowdown could also dampen demand, reducing corporate profits, while supply chain disruptions may worsen the situation. Lastly, US-China trade tensions remain a significant risk, as new tariffs and market volatility could have an adverse impact. Investors must closely monitor these factors.
Do you think this is the right time to buy capital goods stocks?
Despite slower-than-expected capital expenditure in FY25, the capital goods sector presents a strong investment opportunity. The Indian government’s capex target of Rs 11.11 lakh crore remains intact, with only 37% spent by September. Delays due to elections and monsoons are temporary, and the sector stands to benefit from the government's focus on large infrastructure projects like smart cities and transportation networks. As spending accelerates and economic growth picks up, demand for machinery and equipment will increase, making this an ideal time to invest in capital goods stocks.
Are some defense and PSU stocks looking attractive for investment?
Defence and PSU stocks have performed remarkably well in 2024, with the PSU index delivering over 30% returns and 51 out of 56 stocks recording gains. This surge is mainly driven by favourable government policies and increased capex. While the outlook for 2025 remains optimistic, supported by continued government investment and potential gains from the election results, the high valuations of these sectors may hinder outperformance year-on-year. In contrast, undervalued stocks with low price-to-earnings (P/E) ratios are likely to outperform in the coming year, offering more attractive growth prospects.
Do you expect the US Federal Reserve to take a pause after the likely 25 bps rate cut in December?
The US Federal Reserve’s decision to pause or continue adjusting interest rates after a likely 25 basis points rate cut in December will depend on factors like economic data, market conditions, and global trends. However, it’s likely that the Fed will pause further rate cuts after December. The newly elected president's potential aggressive tariff policies could lead to higher inflation, prompting the Fed to halt cuts in order to maintain economic stability. Additionally, retaliatory tariffs from other countries may complicate the situation, making a cautious approach by the Fed more probable.
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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