Expert view | Take a long-term approach to overcome short-term volatility; BFSI ‘attractive’ for 2025: Mohit Batra

Expert view: The performance of the Indian stock market in 2024 has been remarkably positive, with domestic equity benchmarks Sensex and Nifty 50 posting almost nine percent gains each. Nifty 50 crossed the milestone of 22,000 to 26,000 in a relatively short time. However, the second half of the year saw significant volatility due to both domestic and global factors.

Several triggers, including new global trade patterns, higher rates and shifts in domestic monetary policy, are expected to influence stock market sentiment in the coming year. These factors are likely to create a dynamic environment that presents both opportunities and challenges for investors in 2025.

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Before the Indian stock market enters the new year 2025, Dr. Mohit Batra, Founder of MarketsMojosaid in an interview with Mint’s Nikita Prasad that 2025 is likely to present a more challenging investment landscape and that investors should take a long-term perspective amid periods of volatility. The D-Street expert believes that the valuation of the BFSI sector is attractive and is likely to pave the way for higher inflows, especially from private banks.

Edited excerpts from the interview:

1. What is your view on the performance of the Indian stock market in 2024? What are the key triggers that will impact the Indian stock market in 2025?

In 2024, the defining factor for the Indian stock market will be the resilience of retail investors. Unlike in previous years, private participants showed commendable maturity in using volatility as an opportunity rather than a deterrent. Retail investors have deployed record amounts into equities, surpassing the previous peak in 2021 and consistent SIP inflows into mutual funds.

This reflects an evolving understanding of stock markets as a crucial tool for long-term wealth creation. Despite muted inflows from foreign portfolio investors (FPIs), robust retail investor participation provided significant support, cushioning the impact of weak FPI activity.

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Looking ahead to 2025, several challenges deserve attention. Chief among these are possible policy shifts in the US following the inauguration of Donald Trump in January. India’s economic growth has weakened in the first two quarters of the current fiscal, while GDP figures for the December quarter are also expected to remain disappointing. Reviving growth will require decisive policy action from the government, making such reforms a crucial market trigger.

Moreover, food inflation is becoming a major concern for central banks worldwide. Higher food prices could influence interest rate cycles, delaying expected interest rate cuts. Another critical factor is the Bank of Japan’s potential rate hike, which, if materialized, could disrupt global capital flows and thus impact market sentiment. These triggers underline the importance of strategic and adaptive market navigation in the coming year.

2. Which sectors are ready for high growth potential in 2025? Should investors focus on domestic cyclical factors as GDP slows?

We expect the government to prioritize infrastructure spending in 2025, especially given relatively limited spending in 2024. This renewed focus should significantly benefit sectors involved in infrastructure development. Private sector banks are also poised for a strong recovery. After two years of underperformance, their attractive valuations position them as potential outperformers in 2025.

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As a contrarian play, we see value in the FMCG sector. Although the sector has faced several headwinds in recent years, it appears that the sector has weathered the worst of it. A revival in urban demand is expected, coupled with margin expansion for FMCG companies, which could drive strong performance in the coming year. Collectively, these sectors offer attractive opportunities for investors seeking growth amid economic uncertainties.

3. What impact will the administration of newly elected US President Donald Trump have on the US and Indian stock market? Should we worry about the outflow of FPIs?

The impact of Donald Trump’s administration will largely depend on the policies pursued, especially with regard to tariffs and trade agreements. While some campaign promises can translate into actionable policies, others can serve as negotiating tactics rather than tough action.

FPI flows to India were subdued in 2024, following record inflows in 2023. However, we expect a shift in 2025, with the US market likely to underperform, potentially shifting flows to emerging markets such as India. This could result in an FPI inflow of ₹75,000 crore ₹1 lakh crore for the year. Moreover, many FPIs remain underweight Indian equities, a positioning that we expect to be corrected in 2025, further supporting FPI flows.

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4. What are your top stock picks for 2025, especially from the IT and BFSI pack? Will IT stocks generate high returns thanks to the aggressive stance of the US Fed?

We currently favor increased allocation to the BFSI sector between IT and BFSI. After underperforming during the market rallies of the last two years, BFSI’s valuations have become attractive, paving the way for higher inflows, especially from private sector banks. The expected rate cuts by the Reserve Bank of India (RBI) in 2025 will further increase the attractiveness of the sector. The upcoming Union Budget is likely to announce measures to boost private capital expenditure, which could boost corporate loan growth from banks.

5. What should be the trading strategy for retail investors in 2025 in case of volatility? Where do you see Sensex and Nifty reaching by end of 2025?

The market is expected to be more selective in 2025, with specific sectors driving performance rather than a broad rally. This environment will require investors to take a disciplined approach to stock selection and risk management. In contrast to the relatively clear gains we saw in 2023 and 2024, the coming year is likely to present a more challenging investment landscape.

India remains well positioned to be one of the best performing markets globally over the next decade. Retail investors need to take a long-term perspective, ideally a horizon of five years or longer, to weather short-term volatility. Any market correction should be seen as an opportunity to increase equity allocation, reinforcing the principles of disciplined investing (not trading) for sustainable wealth creation.

Disclaimer: The views and recommendations expressed in this analysis are those of individual analysts or brokerage firms, not Mint. We strongly advise investors to consult certified experts, consider individual risk tolerance and conduct thorough research before making investment decisions as market conditions can change rapidly and individual circumstances may vary.