Indian equity market is expected to witness near-term weakness and heightened volatility in the first quarter of the calendar year (CY) 2025, according to Emkay Institutional Equities, a part of Emkay Global Financial Services Limited.
However, it anticipates a gradual consumption recovery in H2CY25, led by an improvement in employment trends, a revival in unsecured lending, and an uptick in welfare spending.
Retains Nifty 50 projection at 25,000 level
Emkay analysts have retained projections of Nifty to be at levels of 25,000 by December 2025, and added that FPI selling to subside by Q2CY25.
They expect a recovery in the second half of this fiscal, driven by renewed government spending and tax relief-led consumption spend.
Commenting on the outlook for equity markets, Nirav Sheth, CEO – Institutional Equities, Emkay Global Financial Services, said, “The bottoming process is usually volatile which we are currently witnessing. Our macros are solid, given the low and stable CAD, fiscal deficit under control, and a more accommodative monetary policy now. We estimate that the worst of the earnings downgrade cycle is behind us.”
“Despite short-term headwinds, the structural investment case for India remains intact,” stated Seshadri Sen, Head of Research and Strategist – Institutional Equities, Emkay Global Financial Services.
Capex growth
The brokerage anticipated a 10-13 per cent slowdown in capex growth due to election spending, following a 31 per cent CAGR between FY21-24. However, a rebound in FY26 is expected as policy certainty returns. “While capital-heavy sectors face challenges, green energy continues to be a bright spot,” the Emkay report read.
FPI selling expected to subside
Despite current selling pressures, Emkay says that the FPI selling would stabilise post first quarter. “A peak in the US Dollar Index (DXY) should also ease rupee depreciation concerns and help stem FPI selling. The RBI’s liquidity injection could stimulate domestic equities and benefit the BFSI sector,” it said.
Key sectoral calls
Emkay Institutional Equities has maintained an overweight stance on discretionary, real estate and healthcare sectors, while remaining neutral on industrials, IT, and energy. The brokerage has designated underweight stance to financials, staples, and materials due to structural concerns and valuation pressures.
Investment calls
Lupin, Zomato, Tata Motors, and IndusInd Bank are Emkay’s top picks among large caps. The brokerage favours Escorts, Paytm, and Metropolis in mid caps, and Stovekraft and Quess Corp in the small cap segment.