December 19th 2024.
In the bustling city of Mumbai, a domestic brokerage firm released a statement on Thursday regarding the expectations for equity investors in the year 2025. After a strong period of growth, the firm advises investors to lower their return expectations for the upcoming year. According to the firm, NSE's 50-share benchmark is projected to reach 26,482 points by the end of 2025, which is a significant increase of over 10% from the current close of 23,951.70 points.
Dhiraj Relli, the managing director and chief executive of the firm, believes that equities will continue to outperform other asset classes in 2025 and that the long-term India story remains intact. However, he cautions that investors will need to adjust their expectations as the market has consistently delivered high returns in recent years. Relli notes that many investors who have entered the market in the past few years have yet to experience a major correction, making it crucial to set realistic expectations for future returns.
The firm recommends that investors focus on large-cap companies rather than mid and small-cap companies, which have seen significant increases in recent years. Relli advises that at least 67% of an investor's portfolio should be allocated to larger, more established companies that have endured multiple business cycles. The remaining portion can be invested in smaller companies, but Relli emphasizes the importance of carefully selecting individual entities for investment.
A senior official from the firm also acknowledges that in the last few years, a majority of small and mid-cap stocks have delivered positive returns for shareholders. However, the official predicts that trend will reverse in the upcoming year, with only 20% of these stocks expected to yield profits. Relli believes that this will be a key factor in the return of foreign portfolio investors (FPIs) to the Indian market, as they are waiting to see earnings growth in Indian companies, which is expected to happen in the second half of 2025.
The firm's head of institutional equities, Unmesh Sharma, comments on the current GDP growth slowdown in India, stating that it is concerning. He predicts that the government will continue to prioritize public expenditure in order to boost economic growth. Meanwhile, Varun Lohchab, the head of institutional research, remains optimistic about the future of the Indian market, especially for large banks, top IT companies, and capital goods and building materials. On the other hand, the firm has a negative view on the auto, consumer staples, small finance banks, and NBFC sectors.
Relli also shares that the firm, which recorded a post-tax net of Rs 945 crore in FY24, is confident in increasing its bottom line to over Rs 1,100 crore in FY25. He also mentions that there are no plans to list their subsidiary of India's largest private sector lender, HDFC Bank, as the firm has a high return on capital and successfully raised capital through a rights issue earlier this year. With this promising outlook, the firm remains optimistic about the future of the Indian market and the potential for growth in the upcoming years.
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