This smallcase manager heavily bullish on markets for FY25, with focus on these 4 themes

In December, Indian listed companies on the NSE achieved a notable milestone as their market capitalization surpassed $4 trillion (Rs 334.72 trillion) for the first time.

The Nifty 50 index gave a return of 30 percent during the fiscal year. The broader indices notably Nifty Smallcap 100 gave a stellar return of 70 percent during the same period while the Nifty PSE Index gave a return of 105 percent.

The outstanding achievement can be credited to vigorous engagement from retail investors and significant inflows from foreign portfolio investors (FPIs) who have bought a whopping Rs 1,50,000 crore in the cash market in FY24, complemented by a buoyant economic expansion, robust corporate earnings, and expectations of sustained political stability leading up to the forthcoming Lok Sabha elections.

Outlook for FY25

Markets are likely to remain bullish on account of the pre-election rally. This is supported by the FII data who have been net buyers for March in the cash market (Rs 24,000 crore) and also have carried over huge positions in the April contracts. This is also supported by the fact that both Nifty and Nifty Smallcap ended the FY24 above their 20 moving averages respectively.

The Fed has hinted at 3 rate cuts for this year which in turn could lead the RBI to cut the interest rates which will infuse more liquidity in the stock markets for this fiscal.

Bloomberg will include Indian bonds in an emerging market index, possibly attracting $3-4 billion in investment in FY25.

Global brokerage firm Morgan Stanley increased its GDP growth forecast for India in FY25 to 6.8 percent, up from the previous estimate of 6.5 percent, citing ongoing momentum in industrial and capital expenditure activities. This will boost the markets positively.

Citing the above reasons we are heavily bullish on the markets for FY25.

Sectors to look out for:

The capital goods, automobiles, and consumer services sectors are favoured by foreign institutional investors (FIIs), evident from their significant investments in FY24. Capital goods saw the highest investment of Rs 48,000 crore, followed by consumer services and automobiles at Rs 30,000 crore each. These sectors are expected to thrive further due to rising demand and government initiatives for infrastructure development.

Public sector undertakings (PSUs) have shown impressive performance, with the Nifty PSE Index outperforming major indices, indicating growing investor confidence. Despite this, PSUs still have low valuations, presenting opportunities for further gains. The government's focus on initiatives like 'Make in India' and increased spending in sectors like railways and defense have contributed to a substantial increase in market capitalization, nearing Rs 20 lakh crore. Expectations of the incumbent government's victory in the 2024 general elections and strong order books have also bolstered investor confidence in PSUs, signalling robust macroeconomic fundamentals and high demand.

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