 "Which sectors will shine in 2025? Mirae Asset bets on IT, Auto, Defence")
Indian markets are poised for growth in 2025, with several sectors expected to lead the charge. Despite a recent slowdown, India's GDP growth remains the highest among the world's top economies, bolstered by a strong recovery post-COVID. With GDP projected to gain momentum due to increased public and private investment, monetary easing, and a resilient services sector, experts at Mirae Asset Capital Markets are optimistic about certain sectors in 2025.
Manish Jain - Director of the Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets highlights the following sectors for 202:
1. Information Technology (IT)
IT would be the most favoured sector as of now. Trump policies, lower taxes, new trade tariffs will strengthen the dollar and depreciating INR could help IT sector. DOGE will push for AI and digitization. Nifty 50 IT weights are near bottom since 2011. Recovery in BFSI segment and the US markets signals potential demand stabilization. The demand for AI and digital solutions continues to grow, supported by favorable exchange rates.
2. Automotive
In the automotive sector, two-wheelers and tractors are anticipated to thrive due to rural market recovery and increased consumer spending related to weddings and agricultural productivity. This sector will also benefit from the uptick in construction and infrastructure projects.
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"In Auto, 2 wheeler and tractors are expected to lead because of rural market recovery, marriage related spends, strong Kharif crop, and favorable Minimum Support Price. Increase in traction of key industries like construction, mining, agriculture, and capex for infrastructure projects can be positive for CV segment," said Jain.
3. Banking, Financial Services, and Insurance (BFSI)
In BFSI, it’s time to look at non-lending businesses like Market Infrastructure, Wealth Management, Broking, Insurance etc. High demand for health insurance will continue to grow with economic growth. Consistent rise in Indian equity markets are attracting investors. Robust mutual fund flows and strong momentum in demats will help these non-lending businesses.
4. Defense
The defense sector, despite some volatility in share prices, remains an attractive option, especially during market dips. With supportive government policies and increased local production, opportunities in electronic warfare and advanced military technologies are set to expand. Trump is expected to strengthen military capabilities through procurement or strategic alliances. Expect opportunities in Electronic Warfare, Avionics, Radars, Missiles, UAVs and Fighter Craft.
5. Power and Solar Energy
India’s ambitious renewable energy goals, including a target of 500GW of solar capacity, position the power and solar sectors for substantial growth. Projects like the Green Energy Corridor and increased demand for solar infrastructure are set to drive investment.
"In Power and Solar 500GW renewable energy capacity expansion, Green Energy Corridor project, Revamped Distribution Sector Scheme (RDSS), Solar Parks, lifetime high orderbooks and strong demand outlook are positive for Solar, RE Financers, Power Infrastructure, EPC players, smart meters, T&D segments," said Jain.
6. Healthcare
The healthcare sector is benefiting from increased capital expenditures, especially in hospitals and diagnostics. The clearance of the Biosecure Act opens avenues for growth in contract development and manufacturing organizations (CDMO), particularly in the U.S. market.
"US business of key pharma companies is set to benefit from easing pricing pressures on the generics, key product approvals and subsequent launches," said Jain.
Economic Outlook
While inflation rose to 6.2% in October 2024 due to food prices, it has since moderated. A projected rate cut of 50-75 basis points in the next six months could further enhance the investment environment.
Despite recent FPI outflows of nearly $34 billion in 2024, domestic flows, primarily through systematic investment plans (SIPs), are showing resilience. Investors are advised to maintain a cautious approach, keeping 15-20% of their portfolios in cash to capitalize on potential opportunities in 2025.
"In next 6 months, 50-75 bps rate cut can happen in India. For equity segment, domestic flows have show great resilience. Money making in 2025 will not be as straight as in last 4 years. Keep some cash (say 15-20%) in portfolio, 2025 may give that lump sum opportunity," said Jain.