Three key risks for Indian equities but rest of 2025 likely to be better, says StanC's top investment official

In an India Market Outlook report released earlier this month, Standard Chartered stated that it stays “overweight equities” as “easing financial conditions, improving macro fundamentals and revival in corporate earnings amid a weak USD (US dollar) outlook are supportive of risk assets outperformance”.

Global policy uncertainties along with slowing global growth concerns and escalating geopolitical tensions are the key risks for equities in India in the second half of 2025, says Manpreet Gill, Chief Investment Officer - Africa, Middle East & Europe (AMEE), Standard Chartered.

He, however, adds that earnings and economic growth in India are expected to revive in the second half with the worst behind us and domestic focused sectors are likely to do well.

“I would rank policy uncertainty as the highest risk because that goes with the heart of US trade policy and where do we end up... I would say growth downturn perhaps would come a close second with geopolitical concerns as well,” said Gill in an interaction with Moneycontrol.

“A lot of the risks globally and for India ultimately stem from the risk to US inflation. We talk about tariffs, we talk about oil prices, geopolitics, but a channel to financial markets, and how they become a risk for markets is actually because of their impact on inflation,” added Gill.

In an India Market Outlook report released earlier this month, Standard Chartered stated that it stays “overweight equities” as “easing financial conditions, improving macro fundamentals and revival in corporate earnings amid a weak USD (US dollar) outlook are supportive of risk assets outperformance”.

“We believe both, economic and earnings growth is likely to revive in H2 2025. Easing financial conditions and the fiscal boost via income tax cuts is likely to lift consumption supporting domestic demand and corporate earnings performance. In our view, though the worst for Indian assets maybe behind us, investors need to be selective in risk taking,” added the report.

According to the global foreign bank, the first half of 2025 was a textbook lesson in investing through volatility and overall, asset class performance suggests a favourable risk environment with Indian equities, bonds and gold delivering 9%, 5% and 26% returns (local currency) respectively.

“We are not expecting to return to the heady days of 25% annualised returns on Nifty but we still think that it is the best place to be in terms of delivering the best returns and we don't think it needs much beyond stabilisation of growth to actually get to that point,” said Gill.

The global investment expert is bullish on domestic focussed sectors like financials, healthcare and consumer discretionary while advising investors to be cautious on IT.

Meanwhile, the three key lessons for investors, according to Standard Chartered are that market timing is difficult and costly, diversified allocation can help tide through volatility, and geopolitical conflicts tend to have a short-term impact.

The foreign bank also expects bond yields to decline modestly over a 12-month horizon. “Frontloaded policy easing and improving banking system liquidity are offset by unattractive yield premiums. We see steepening of domestic bond yield curve and are OW medium-maturity bonds and high-quality (AAA) corporate bonds,’ stated the report.

Interestingly, according to Gill, the worst is behind us and investors should stay invested in equities even as there was heightened volatility witnessed in the first half of 2025.

“We believe that with Indian equities as well as with global equities, one should expect volatility, but we still think is better off to stay invested,” said Gill.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.