Indian Markets Poised for Rebound, Nifty 25,000 Target by Year-End
The Indian stock market is likely to see a turnaround in the second half of 2025, with the Nifty index likely to hit 25,000 by December, as per a report by Emkay Institutional Equities. The recovery is expected to be led by enhanced consumer spending, improved employment trends, and relief in foreign investor outflows.
In the short term, market volatility will continue, especially in the first quarter of 2025, as a result of weak demand and worldwide uncertainties. Nonetheless, drivers like rising retail lending, better liquidity, and government welfare expenditure are projected to support economic sentiment and help market recovery from mid-2025 onwards.
"Markets have a tendency to over-react in both ways, and the ongoing bottoming process is still volatile", Emkay Global Financial Services' Nirav Sheth stated. He said the cycle of downgrades in earnings is primarily done and foresees recovery in the second half of the fiscal year based on increased government spending and relief from taxes.
On a sectoral front, Emkay Institutional Equities maintains an Overweight stance on discretionary consumption, real estate, and healthcare, while remaining cautious on financials, consumer staples, and materials due to valuation concerns.
The report also emphasized that foreign portfolio investor (FPI) offloading, which has been one of the main market worries, is expected to ease by the second quarter of 2025. Moreover, a declining US Dollar Index (DXY) may stabilize the Indian rupee, further enhancing market sentiment.
Corporate profits are likely to pick up, with mid-teens growth expected in FY26, driven by financials, metals, and energy stocks. Although capex growth, which has seen a 31% CAGR over FY21-24, is likely to decelerate to 10-13% because of election-related expenditure restraint, a robust recovery is likely in FY26 as policy clarity returns.
While there has been short-term fluctuation, the report is bullish on India's long-term prospects for its stock market and stresses that investors may be ready to enter the market at present.
