Key themes for 2025: Fund managers betting on insurance, IT, manufacturing, and discretionary sectors amid valuation comfort

representative image

With the new year just round the corner, fund managers have moved their bets to sectors like insurance, IT, manufacturing, consumer discretionary, and banking as valuations in many sectors have shot through the roof and experts believe these sectors offer some comfort in terms of valuations.

Here are the key themes that fund managers are betting on for 2025:

Consumption - As per capita incomes grow, spending shifts from essentials to discretionary items, says Neelesh Surana, CIO at Mirae Asset Managers India. For instance, once basic needs like food and housing are met, incremental spending is directed toward areas like travel, entertainment, home improvement, and lifestyle products, he adds.

Also, post-COVID, there is a significant revival expected in mass consumption categories, especially in areas like retail, footwear, home improvement, and the motor sector, he said. “With economic recovery and government support, both urban and rural segments are likely to experience a surge in demand,” he adds.

Manufacturing - The manufacturing sector is poised for growth because of Make-In-India, targeted PLI schemes for electronics, pharmaceuticals, and batteries, Surana said. He added that strategic duties on products like footwear and plywood aim to curb low-quality imports, and promote domestic production. Plus, the government is actively working to increase manufacturing's contribution to GDP from the current 14-15 percent to 20-25 percent, which will benefit the sector.

Asset management companies (AMCs) - Alok Agarwal, Head - Quant and Fund Manager at Alchemy Capital Management, is focusing on the Capital Markets space, including AMCs, Wealth Management, and Broking. The broking industry has undergone significant transformation through the adoption of technology, resulting in cost efficiencies, said Agarwal. This shift has also helped reduce operational rigidity, even in the face of challenges such as declining derivative volumes. He also noted that the rise in Indian retail participation in the stock markets underscores a growing customer base for broking services.

Information Technology (IT) - The Indian IT sector could benefit from the rate cut cycle in the US as the opportunity cost for discretionary projects would reduce, said George Thomas, Fund Manager- Equity, Quantum AMC. He, however, added that given the recent rally, the upside is limited for IT sector.

Insurance - Select names in insurance space are seeing margin pressure and higher claims ratio, Thomas said. Considering their long-term trajectory, current valuations offer reasonable upside potential, Thomas said.

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.