Nifty 50 Unlikely to Reach New Highs in 2025; More Market Correction Ahead, Says Siddarth Bhamre
Siddarth Bhamre : The Indian stock market has been grappling with intense volatility over the past six months, with significant corrections in the Nifty 50 index. Despite hopes of a rebound, market expert Siddarth Bhamre, Head of Research at Asit C Mehta Investment Intermediates, predicts that the market may have further room for correction.
Bhamre believes that the bearish trend is driven by foreign institutional investors (FIIs) pulling out funds, a factor that may continue to weigh on market sentiment. In an interview with Mint, he discussed the outlook for the market, investment opportunities, and why mid- and small-cap stocks remain risky bets at the moment.
Market Correction Likely to Continue
Over the past few years, domestic investors have played a key role in driving the Indian equity market, but the current downturn is largely due to FIIs exiting. Bhamre points out that several factors need to reverse before the market stabilizes. These include:
- Stability in currency: The rupee’s fluctuations have impacted investor confidence.
- Bond yield vs. earnings yield gap: A widening gap discourages equity investments.
- Relatively cheaper valuations: High valuations have kept institutional investors wary.
- Growth visibility: Companies need stronger earnings prospects to attract investments.
- Stable global trade environment: Ongoing geopolitical issues continue to create uncertainty.
Given these uncertainties, Bhamre expects that the Indian stock market could remain under pressure in the near term.
Mid- and Small-Cap Stocks: A Risky Proposition
The biggest casualties of the recent downturn have been mid-cap and small-cap stocks. While some investors see this as an opportunity for bargain hunting, Bhamre advises caution.
He notes that a significant portion of domestic fund inflows in 2023 and early 2024 went into mid- and small-cap schemes. Since there have not yet been major outflows from these funds, any further decline could trigger panic selling. This could lead to even deeper losses in these segments.
Where to Find Investment Opportunities?
Historically, after a major market correction, large-cap stocks tend to recover first, followed by mid-caps. Bhamre believes that large-cap stocks currently offer attractive valuations and could be the first to see a rebound.
Some of the promising sectors for investment include:
- Paints: Long-term demand remains strong despite short-term challenges.
- Life Insurance: The sector is witnessing structural growth.
- FMCG: Defensive stocks that provide stability in volatile markets.
- Auto and Ancillary: Selected players in this space offer value.
Will Nifty 50 Hit New Highs in 2025?
Bhamre is not optimistic about Nifty 50 reaching new highs this year. He points to weak earnings expectations for Q4 FY25 and Q1 FY26, coupled with supply pressure from domestic investors. While markets could see some recovery, he does not anticipate double-digit gains in 2025.
IPO Market Faces a Slowdown
The Indian IPO market, which saw a boom in 2023, is now witnessing a slowdown. According to Bhamre, capital raising is closely linked to bullish market sentiment.
When markets are rising, liquidity is abundant, and investors are more willing to invest in new companies. However, in a downturn, investors prefer to focus on existing portfolios rather than betting on new entrants. As a result, IPO activity is likely to remain muted until the market stabilizes.
Impact of Global Trade Wars and Inflation on Indian Markets
The global economy is currently facing multiple challenges, including trade wars and inflationary pressures. Bhamre warns that while supply-chain-related inflation is under control, trade restrictions could lead to higher costs.
A slowdown in major economies like Europe and China could impact Indian companies that rely on exports. Sectors such as IT, pharmaceuticals, textiles, and jewelry may face earnings pressure due to weaker global demand. However, Bhamre remains hopeful that trade tensions will ease over time, providing relief to businesses.
Gold Continues to Shine Amid Market Volatility
Gold has been on an upward trajectory, driven by both USD strength and geopolitical uncertainties. Despite this rally, Bhamre does not consider gold a great investment. He believes that stock market investments, particularly in companies with strong earnings potential, offer better long-term wealth creation opportunities.
Advice for New-Age Investors
Many new investors entered the stock market during the post-COVID bull run and are now experiencing a downturn for the first time. Bhamre advises them to reassess their portfolios instead of holding onto beaten-down stocks in the hope of a recovery.
He emphasizes the importance of focusing on value rather than just price corrections. Stocks with strong earnings visibility are the ones most likely to bounce back when the market turns positive again.
Key Financial Ratios
Below is a snapshot of key financial ratios relevant to the current market scenario:
| Financial Metric | Current Status |
|---|---|
| Nifty 50 P/E Ratio | 21.5 (Moderate valuation) |
| Nifty 50 P/B Ratio | 3.9 (Slightly overvalued) |
| FII Net Flows (YTD) | -₹25,000 crore (Outflows) |
| 10-Year G-Sec Yield | 7.1% (High bond yields) |
| Gold Price (INR/10g) | ₹64,000 (Near all-time high) |
| Crude Oil Price (Brent) | $85 per barrel (Inflationary risk) |
Conclusion
The Indian stock market is undergoing a phase of correction, with little hope of Nifty 50 reaching new highs in 2025. Investors should brace for more volatility and focus on large-cap stocks with strong earnings potential. Mid- and small-cap segments remain risky, and the IPO market is unlikely to pick up until the overall sentiment improves.
For long-term investors, this period presents an opportunity to reassess portfolios and invest in fundamentally strong companies that can weather the downturn and emerge stronger when the market recovers.
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.