Equities to see muted returns in 2025, Gold a better bet: Sandip Raichura

Stock Market Outlook: Volatility may remain high over the medium-term and it is difficult to gauge market trajectory at this point, said Sandip Raichura of PL Capital

Return of trade war concerns, geopolitical tensions, and stretch valuations, back home, have cast a blow to Indian stock markets over the past few months. Come 2025, SANDIP RAICHURA, CEO of Retail Broking and Distribution & Director, PL Capital - Prabhudas Lilladher, believes India equity markets may see moderate returns. 

In an email interview with Nikita Vashisht, Raichura said volatility may remain high over the medium-term and it is difficult to gauge market trajectory at this point. Edited excerpts: 

Q) Indian markets are ending 2024 on a volatile note. How do you see 2025 panning out for Indian equities?

Currently, risk-off sentiment in markets is largely due to concerns over stretched valuations following a lackluster Q2 earnings season. Nifty earnings posted their slowest growth since June 2020, with EEPS seeing a cut of 0.5/2.0/1.5 per cent for financial year 2024-25 (FY25)/26/27. Furthermore, government capex has been slow, with the first half of the current financial year (H1FY25) spend only 37 per cent of FY25 Budgeted Estimate. 

 

Despite all the volatility and corrections, we are still up around 12 per cent year-to-date (YTD), which is a meaningful gain for the investors. So, few of the biggest cues for 2025, are the clarity on trade tariffs by the US, rate easing cycle in India, government capex spend, the pickup in domestic savings and bounce back of corporate earnings. 

We value the Nifty at 15-year average price-to-earnings (PE) and arrive at 12-month target of 27,381, down from 27,867 earlier. 

Q) Which asset class(es), do you think, may rule the next calendar year?

Currently, gold remains a preferred asset class amid sustained geopolitical tensions and economic uncertainty. When it comes to equities, investors should moderate their expectations, while staying prepared for potential medium-term volatility. As protectionism may take centre stage in the US in 2025, it may lead to global funds flowing back to the US markets. On the flip side, Trump’s proposed policies, such as corporate tax cuts and tariffs on imported goods, could strain the US fiscal deficit. So, it is difficult to gauge market trajectory at this point.

  Q) Is there any event that you think may catch investors off guard in 2025?

From the global market point of view, new policies especially, trade tariffs by the US, beyond what one expects, can deliver a blow to the markets. Other than that, several pockets of the globe are witnessing wars and further escalations can send shock waves in the prices of crude, restrict free movement of goods etc.

  From the domestic point of view, earnings and government spend will be key things to watch out for.

  Q) How was CY-2024 for PL Capital amid regulatory tightening by Sebi? What are your plans for next year?

A busy year for fund raises, PL Capital has been leveraging the optimism to further its business. We are also leveraging our research strengths around differentiated research including via India’s only fully quantamental PMS, Aqua, and the soon-to-be launched Alternative Investment Funds in the performing credit space.

  Q) Do you expect Sebi to further tighten trading norms, especially for retail investors? Is the broking industry comfortable with such regulatory tightening?

Sebi has been moving in the right direction with an aim to make capital markets safe. In the longer term, such measures are healthy as investor confidence builds in the system. While these can create business issues in the short term, we believe the entire industry has become comfortable over a period as the intent has become clear especially around curtailing excesses. One has smaller issues like back-office vendors not being able to cope in time with such new guidelines but that’s not a regulators issue.

  Q) What are your expectations from Budget 2025? Do you think there could be further tax hikes, in-line with last year’s move?

I believe the focus will be on reducing the tax burden on the common man. Even for equities, the Union Budget 2024 introduced a hike in the tax rate for Short Term Capital Gains (STCG) and Long-term Capital Gains (LTCG). It is unlikely that the Finance Minister will tinker with the rates again.

  Q) How do you assess Sebi’s recent discussion paper/draft guidelines issued on Algo trading for retail investors? If implemented, how will it impact brokers and investors?

I believe this paper has the potential to finally clarify the air around algo trading in terms of regulations and procedures. This regulation intends to lay down a framework within which retail algos can thrive.