New Delhi: According to the Annual Market Outlook 2025 report by Mirae Asset Mutual Funds, Indian corporations are anticipated to experience improved earnings in the upcoming quarter, which is expected to enhance returns in the new year.
The report noted that, despite elevated valuations at the beginning of the year, equities performed well, with mid and small-cap stocks achieving double-digit returns.
It emphasized that stocks continue to be a preferred investment option due to their potential for substantial returns. However, it is crucial to maintain a diversified investment portfolio, including stocks, bonds, and other assets, to mitigate risk.
Furthermore, the report indicated that India's medium to long-term outlook remains strong, supported by solid macroeconomic fundamentals, reduced corporate debt levels, high asset quality, fiscal discipline, favorable demographics, digitization, and increasing income levels.
Household debt levels are also considered reasonable in comparison to global standards. The report highlighted that India's aggregate debt-to-GDP ratio is lower than it was in 2010, even as it has increased globally.
"We maintain a positive outlook on equities from a medium-term perspective, driven by strong profitability and free cash flows. Earnings growth is likely to be a significant factor influencing returns in 2025. Given that valuations are currently at a premium and some market segments exhibit froth, careful stock selection will be essential," the report stated.
On the sectoral front, the report expressed confidence in the Banking and Financial Services sector, citing reasonable valuations and higher return ratios, such as Return on Equity (ROE) and Return on Assets (ROA).
The report indicated optimism regarding a rebound in consumption and a favorable outlook for manufacturing, attributed to the Government's initiatives and the China+1 strategy.
The year 2024 is marked by elections in over half of the world's economy, both in terms of GDP and population, including significant elections in India and the United States.
While India is generally experiencing policy stability, it will be crucial to observe the policies implemented by the new U.S. administration, especially concerning trade, immigration, deregulation, taxation, and government spending. These factors are expected to influence global trade and financial markets, as noted in the report.
Indian capital markets have witnessed an unprecedented increase in primary equity offerings, with domestic investors actively participating in the secondary market.
Conversely, Foreign Portfolio Investors (FPI) have adopted a cautious stance due to concerns over elevated valuations.
A notable decline in Indian equities could potentially trigger inflows from Foreign Portfolio Investors (FPI) in the future, the report concluded.
