Benchmark index Nifty 50 is set to close the year with a near 10% gains, with the stock markets having endured a year of relentless foreign selling and concerns over growth slowing down. Now, going into 2025, double-digit return on the leading indices possibly looks challenging, according to Prime Securities.
The asset management company said in the coming year, 'return moderation' will be the mantra to keep in mind. While the economy will manage to grow by more than 6.5%, returns on the main indices may stay muted in 2025, with tech-driven consumption theme, IT products, infrastructure and sustainability-led ideas will likely outperform. A more 'bottoms up approach' will be key to higher returns, according to Prime Securities.
It will also be a year when 'smart, active investing' will outperform the passive investing philosophy, said Prime Securities. The market returns will be supported by high domestic liquidity and participation, an interest rate regime that is heading downwards, and a stable policy regime.
The trend of equity investment is expected to continue among India's domestic investors and savers, who will prefer the SIP route and could take the asset under management of mutual funds past $1 trillion in 2025, said Prime Securities, projecting a 20 percent on year growth in customers of AMCs. The monthly SIP inflow stayed above Rs 25,000 crore for November, despite market fluctuations in recent months.
The headwinds are mostly known, in the form of global geo-political tensions and uncertainties relating to cross-border trade. Rupee's depreciation could cause some volatility, with the INR having breached a record low of 85 to a dollar. The rupee has hit record lows in December, and the trade deficit in November has expanded more-than-expected to $37.8 billion, a record.
In such a period of moderation of equity returns, gold and other precious metals are expected to continue their upward march, and so will digital currencies. "Digital currencies will be sanitised and included for payments in a much larger manner," said Prime Securities, as global acceptance for these assets improves in 2025.
Prime Securities is also projecting interest rate cuts between 50-75 bps in 2025 by the central bank, but the triumvirate of currency, interest rate and growth will likely be a 'difficult balance to maintain'. The year will also see global participation in Indian debt rise, it said.
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