Kotak AMC’s Market Outlook 2025 is projecting a gradual recovery going forward, after the recent slowdown, but given the steep valuations, investors may need to temper their return expectations.
Harsha Upadhyaya, CIO-Equity at Kotak Mutual Fund said in Mumbai on on December 4, that if investors are in the right set of stocks and funds, they can continue to expect returns.
“If you come with a moderated expectations, I think still there is money to be made in equity markets and it is likely to give you a decent experience over the next 4-5 years. Probably the volatility could be higher than what we have witnessed in the last 4-5 years simply because the valuations do not leave too much room,” Harsha Upadhyaya said.
Kotak AMC is advising investors to look at the large cap space in the current market. “We believe that within equities, one should be slightly overweight on large caps at this point of time. And as you go down the market cap curve, probably you can take a little lesser allocation into other buckets,” he said.
Top Themes at Kotak
Kotak AMC expects to see opportunities in the next year across five main themes: capex revival, finance, technology, revival in consumption, and healthcare.
The capex cycle revival, they believe is evident both in the short as well as long term, driven by increased government and private investments. Total capital expenditure has surged from Rs 10-12 lakh crore pre-COVID to Rs 28-30 lakh crore in FY25, a 2-2.5x increase over six years. With fewer disruptions like COVID on the horizon, consistency in growth is anticipated, Kotak said. While the capital goods sector sees high valuations, select opportunities still show promise.
In technology and IT services, global IT spend continues to outpace growth, presenting strong opportunities for Indian IT firms. Discretionary IT spending is set for a cyclical pickup, with structural growth backed by cloud migration and AI adoption. This positions Indian companies to capitalize on rising global demand and innovation.
The banking and financial services sector, according to Kotak AMC, offers valuation comfort despite challenges like slower credit growth and deposit mobilization. Banks exhibit improving ROE trajectories and strong capital adequacy. While risks exist in unsecured lending, these are manageable, especially for large banks. Rural economic revival further supports growth in financial services.
On consumption, Kotak AMC believe that revival is underway, particularly in rural India. Organized retail is expected to gain market share as families nuclearize, boosting demand for essentials, the note added.
Lastly, healthcare opportunities are expanding with rising incomes improving healthcare spending on per capita basis. Additionally, the CDMO segment is gaining momentum as global players seek alternatives to China, supported by India’s capabilities and government-backed incentives.
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