Indian financial markets are expected to remain volatile in the first half of 2025 amid global and domestic uncertainties, including policies of the Donald Trump administration and the upcoming Union Budget, said Motilal Oswal Private Wealth (MOPW) in its outlook for the calendar year.
The private wealth manager has called for more focused risk management, staggered investments, and better asset allocation while building the portfolio.
China’s measures to counter trade tariffs and its possible implications for the emerging market currencies are also one of the major global events adding to the uncertainties, points the report.
However, MOPW anticipates that the market volatility will subside in the latter half of the year as the events unfold and clarity emerges.
“Despite potential short-term volatility, the medium-term outlook for Indian equities remains positive. This optimism is driven by several factors, including India’s stable macroeconomic environment, characterised by controlled fiscal and current account deficits,” highlighted the report.
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MOPW further expects an increase in government spending in the medium term and improvement in liquidity conditions and monetary stimulus by the Reserve Bank of India (RBI).
The wealth manager is of the opinion that corporate earnings may further slow down and that valuations are high in certain pockets in the market. Despite flat growth expectations projected for financial year 2025 (FY25), it expects strong corporate earnings growth in FY26 and FY27.
“After tepid corporate earnings and slow GDP growth in Q2FY25, MOPW recommends closely monitoring the upcoming earnings season and GDP growth trajectory...We expect this trend to reverse and expect large caps to do better this year given the valuation comfort. In the longer term, earning growth and stock returns should converge,” notes the report.
It added that small cap stocks have run up way ahead of earnings growth in most of the segments.
While the private wealth manager said that domestic inflows through Systematic Investment Plans (SIPs) may slow down if the returns in the equities remain flat, it showed confidence that the inflows will not go down more than 20 per cent of the current inflows as they now have built a strong base.
Further, on real estate, MOPW is more inclined towards the commercial segment than residential.