Stocks that were among the biggest winners in India last year are seeing a poor start to 2025, as investors dial up scrutiny of whether reported earnings warrant the market’s lofty valuations.
New-age technology favorite Zomato Ltd., which more than doubled in 2024, has nosedived 22% since the start of the year with a push from disappointing results. Real estate star Oberoi Realty Ltd. is down 24%, with losses accelerating after it missed profit expectations.
A Zomato delivery rider waits to collect an order outside a restaurant in Mumbai.
The reversals come amid a broader selloff in Indian stocks, with the NSE Nifty 50 Index down 12% from its September record high. The market still looks pricey even after the declines, with the Nifty 50 trading at a higher earnings multiple than all other key Asian emerging market gauges, according to data compiled by Bloomberg.
“The key concern among most asset managers has been around valuations and if they are supported by fundamentals,” said Arvind Subramanian, a senior analyst at Morningstar Inc. Asian funds “find it harder today to pick attractively priced opportunities” in the country, he said.
Small caps have been hit particularly hard after outperforming larger peers last year. Notable decliners include power equipment maker GE Vernova T&D India Ltd., which is down 16% this year ahead of its earnings report. Its stock surged more than 300% in 2024, making it the top performer on the Nifty Smallcap 250 Index.
India stock bulls point to a long-term growth story that is still intact. And valuations have cooled a little, with the recent correction bringing the Nifty 50’s valuation slightly below its five-year average of around 19 times forward estimated earnings.
Still, initial results for the December quarter “do not seem very encouraging,” Kunal Vora, India strategist at BNP Paribas SA, wrote in a note. Earnings estimates for the next two years look “slightly optimistic to us and would require an improvement in the economic outlook to materialize,” he said.
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