The big question: Is this just a bump in the road, or the start of a deeper correction? Can retail investors, who have powered the market’s resilience in recent years, keep the faith? And what happens to initial public offerings (IPOs) after last year’s frenzy?
To guage the market’s pulse, Mint surveyed 23 investment professionals—CEOs, research heads, and fund managers—during 3-12 February. Their verdict? Caution reigns, but some pockets of optimism remain.
This is the second in a new series of quarterly market surveys by Mint, the first of which was held ahead of Diwali in October 2024.
Caution prevails
Most experts (74%) hold a neutral stance on equities for the next six months, preferring to wait out the volatility. Still, 22% remain bullish despite headwinds.
Ajit Mishra, senior vice president of research at Religare Broking, acknowledges concerns over slowing consumption and policy uncertainty but sees selective stock-picking opportunities. “The budget has addressed some concerns about consumption, and market movements will be more focused on individual stocks rather than broad-based rallies across different sectors.”
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Others point to easing inflation as a potential boost.
“We are expecting festivals, weddings and Kumbh mela can add a meaningful contribution to the GDP. Also, the consistent investments from SIP investors would minimize the downside for the market,” says Shrikant Chouhan, head of equity research at Kotak Securities. He also sees steady investments through systematic investment plans (SIPs) limiting downside risks.
India and global markets
Experts remain split on how Indian equities will fare against global peers, according to the survey.
While 39% expect India to slightly outperform, 26% see it moving in line with global markets. Meanwhile, over 30% predict slight underperformance. So far, the numbers favour the skeptics—India’s benchmark Nifty 50 index is down 2.5% year-to-date, trailing global peers.
Despite the recent slump, many experts remain bullish. They anticipate a rebound in earnings growth by 2025-26, fuelled by government spending and rising consumer demand.
India’s resilience to global headwinds and its long-term growth potential continue to attract foreign investment, according to Manish Jain, head of fund management at Centrum.
Other optimists include Pankaj Pandey of ICICI Direct, Shrikant Chouhan of Kotak Securities, Kashay Javeri of Emkay Investment Managers, and Prashanth Tapse of Mehta Equities.
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Yet, nearly a third of experts see India struggling to keep pace. Devarsh Vakil of HDFC Securities warns that after four years of double-digit earnings growth, profits could slow to just 5% in FY25.
Vakil believes India’s premium valuation—its price-to-earnings ratio sits at 24.6x, higher than global benchmarks—could add to the pressure, especially in times of global uncertainty and a shift towards safer assets.
Other experts sharing this view of marginal underperformance include Neeraj Chadawar from Axis Securities, Atul Parakh from Bigul, and experts from PGIM and DSP Mutual Fund.
The consumption push
Most experts expect Indian equities to rebound once corporate earnings recover in FY26. Until then, pressure will persist—61% foresee weak earnings next quarter, while 26% believe the drag will last at least two more quarters.
“Weaker earnings growth will start to recover in a quarter or two. For FY26, we expect earnings growth in the range of 10-15% which will eventually reflect in the market,” said Siddhartha Khemka, head of research at Motilal Oswal Financial Services. But he warned that with little room for further rerating, valuations are unlikely to expand significantly, keeping upside in returns in check.
Despite differing views on the pace of recovery, there’s broad consensus on what will drive it: consumption.
Nearly 91% of experts agree that consumer-focused sectors will fuel India Inc.’s earnings revival in FY26, with 26% strongly believing that the FY25 budget’s push for consumption will lift urban mass-market demand.
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A ₹1 trillion boost—courtesy of personal income tax relief—is seen as a game changer for earnings growth. Experts expect it to fuel discretionary spending, with 96% forecasting gains for consumer durables and 87% anticipating a revival in volume growth for fast-moving consumer goods (FMCG)
The Reserve Bank of India’s (RBI) recent 25 basis-point rate cut is also expected to support gains in auto, real estate, and banking stocks.
However, not all sectors are poised for a lift. Experts remain divided on the outlook for IT, healthcare, energy, power, and metals. Capital goods and infrastructure are even more uncertain, with their trajectory hinging on government capex plans.
“The ₹11 trillion FY26 capex target should boost order inflows and sentiment across infrastructure, power, capital goods, and allied industries,” said Vinit Bolinjkar, head of research at Ventura Securities. “Initial recovery signs should appear in Q4FY25 earnings, with a more tangible impact in Q1FY26.”
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Reading the retail pulse
Meanwhile, market volatility is making retail investors more cautious.
While 26% of experts believe it could slow the surge in new demat accounts seen in 2024, about 40% remain neutral, arguing that volatility can both deter and attract investors. The result? A more tempered retail sentiment, which could weigh on the primary equity market—especially IPOs, which had a blockbuster run last year.
Though 56% of experts expect IPOs to remain relevant in 2025, they anticipate a more subdued role. Around 30% see IPOs playing a moderate part in market activity, while just 8.7% believe they will continue to be a dominant theme. A small minority (4.3%) expect IPOs to lose significance altogether.
MIRA Money’s co-founder Anand K Rathi argues that IPOs will continue to be a key feature of the market due to India’s significant market potential. “The Indian market has significant capacity to support IPOs,” he said.
