Equity
Markets
in 2025
Insights in
2
Mins
What we said in 2024 What we think about 2025
A year of multiple transitions We anticipate a significant shift in equity
Elections in US & India markets as we transition from the "politics of
elections" in 2024 to the "politics of earnings" in
Bottoming global growth rate 2025.
IT - Dark horse of 2024
Earnings Growth Valuations
Nifty Nifty 50 Nifty Midcap Nifty Smallcap
Nifty Midcap 1Y Forward PE
Year Nifty 50 Smallcap 150 250
150
250 Current 19.94 31.50 24.59
FY26E 16.31% 26.82% 23.81% 10 Y Average 20.52 24.53 17.18
FY27E 15.15% 24.08% 19.71% Source: Bloomberg, MOFSL.
Source: Bloomberg, MOFSL.
We expect earnings to be volatile in We view valuations of large cap stocks as in-line
FY25, with an expected rebound in FY26. while mid and small-caps at 15-45% premium to
10 year average.
As the RBI begins its rate-cut cycle and
India gains inclusion in global bond However, we note that earnings growth of mid
indices, we expect the country's cost of and small-caps are also at a meaningful premium
capital to gradually decline over time, to large caps.
which should support earnings.
FII Flows What could keep India's bull
CY2023 (USD mn) CY2024* (USD mn) market going
FII Flows 21,427 413
An earnings upgrade cycle driven by
DII Flows 22,331 61,810 manufacturing in FY26.
We expect FII flows to resume after
dollar stabilises in 2025. Decoding the outook
*Data as on 27th Dec,2024.
Source: Bloomberg, Kotak Institutional Equities
Near-term: Volatile Long-term: Positive
Impact of tariffs by US on China and rest of the world
Heightened volatility is expected in Q1 CY25, driven by tariff and trade news, with corporate earnings
becoming the main focus for the rest of the year.
Themes expected to unfold in the markets next year
We expect India Inc.'s earnings growth to be driven by a recovery in government capital expenditure,
the start of a private capex cycle, and the continuation of the real estate upcycle in FY26.
Sectors to watch out for in 2025
Manufacturing IT Real-Estate Quality NBFC Consumption
(potential
dark horse)
Key risks to look at
Global trade war across nations could slow the economic growth.
Advice for investors in 2025
We believe investors should maintain a balanced mix of large, mid, and small-cap stocks in their
portfolios. Flexi-cap funds offer conservative investors flexibility across market conditions, while
multi-cap funds provide diversified exposure for those with a moderate risk appetite, balancing
growth and risk. Mid-cap funds suit higher-risk investors with a long investment horizon, tapping
into mid-cap growth potential.
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units / securities or to have business relations with Sponsor/ AMC/ Trustee Company and its associates or Edelweiss Mutual Fund.
These views alone are not sufficient and should not be used for the development or implementation of an investment strategy. All
opinions, figures and estimates included in this document (unless as specified in the document) are as of this date & sourced internally
(unless specified) and are subject to change without notice. It should not be construed as investment advice to any party. Neither
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disclaims all liabilities, losses and damages arising out of the use of this information. The recipient of this material should rely on their
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