Sridham Sivaram, veteran market participant and Investment Director of Enam Holdings believes 2025 will likely be challenging for equity investors, and it is 'highly possible' to get a negative return this year. Instead, investors should partially allocate to gold this year and scout for opportunities in the largecap space.
In conversation with CNBC-TV18, Sivaram said that the ongoing selloff in broader market is clearing out a lot of froth.
"We haven't had eight positive years and it is highly possible that 2025 is when we get negative returns. We cannot have a one-way market and in my view, this is very healthy. We had a lot of froth, and some of it is left in the smallcap space," said Sivaram.
Enam Holding's Investment Director said Rupee will be a far more important factor, that may move the equity markets higher or lower, this year. Already, the rupee has seen a steady depreciation against the dollar since the start of the year. Reserve Bank of India's interventions and US tariff-related announcements have been crucial for the currency in recent weeks.
A laboured economic recovery, recent rate cut by RBI, and foreign outflows have led to further weakness in the rupee, also weighed down by uncertainty around US President Trump's tariff threats.
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Enam Holding said they are sitting on some cash, after having turned cautious on Indian equities since September 2024. They do see opportunities after the recent correction, said Sivaram, but are largely in a wait and watch mode. "Some of it (cash holding) is getting utilized as we speak, there is opportunity but there is uncertainty as well," Sivaram said.
This will be a year when the micros will dominate the market trajectory, even as the macros do not look favourable, said Sivaram. "2025 will be a challenging year, and stocks with strong earnings growth will fall less and may even rise," he added. Already, nearly half of the Nifty 50 constituents have seen a fall of more than 20% from their respective 52-week highs.
Data from NSE shows that FIIs have offloaded Indian equities worth Rs 1.06 lakh crore so far this year, while DIIs have bought shares worth Rs 1.2 lakh crore in equities since January.
In this fall, Enam is finding largecaps to be offering far better opportunity, as mid and smallcaps still look expensive from historical perspective. Sridhar Sivaram said he sees possibility of further earnings downgrades in stocks, though they are beginning to like names in financials and discretionary consumption.
Enam is also bullish on gold, which is also an asset allocation call, as well as a hedge against rupee's weakness. Though after a 40% return in 2024 in dollar terms, gold may consolidate, Sivaram added. The 20-year CAGR on the precious metal in rupee terms has matched that of Sensex.
Sivaram also said India needs to be more willing to yield to the US on tariffs, and attempt to position in a way that benefits both countries.
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