Outlook 2025: Top fund managers remain bullish on Indian stock market and suggest these four sectors should be invested

Market veterans and several fund managers from some of the largest Indian fund houses believe that the Indian stock market remains well positioned for growth despite global challenges and risks posed by persistent inflation and high interest rates.

Most of them believe that the slowdown in the Indian economy, which has occurred in the first half of the current financial year, could disappear due to higher capital expenditure by the government and corporates. Some of them emphasize that the revival of consumption and investment will be the main triggers for the Indian stock market next year.

Bullish in the Indian stock market

Fund managers are optimistic about the Indian stock market as they do not see any structural problem with the Indian economy.

Although the latest macroeconomic figures indicate that economic growth is slowing, fund managers appear less concerned. They view economic weakness as cyclical, largely due to low government spending due to national and key parliamentary elections, and an erratic monsoon. They expect that now that the monsoon is behind us, increased government spending and consumption will boost the economy in the second half of the year.

“The Indian economy could gradually recover as government and corporate spending increases. We expect a gradual recovery in spending and therefore GDP growth in the future. Easing global geopolitical tensions and a strong dollar would mean commodity prices are likely to remain under control. is certainly good news from India’s perspective,” said Shiv Chanani, Senior Fund Manager – Equity, Baroda BNP Paribas Mutual Fund.

Karan Doshi, fund manager – equities at LIC Mutual Fund Asset Management, also pointed out that looking beyond the short-term fluctuations, India is ready for a new growth cycle.

Doshi underscored the significant opportunities presented by the ongoing trend of supply chain diversification as the world seeks to reduce dependence on China.

“This shift enables India to become a major player in the global supply chain network. Its competitive advantages – such as a large, youthful workforce, better infrastructure and a strategic location – position the country as an attractive destination for global supply chains,” Doshi said.

Doshi believes that favorable demographic developments, rising productivity and the government’s focus on infrastructure, digitalization and production can stimulate sustainable growth.

“With a growing middle class and a favorable business environment, India can emerge as a major global economic player, benefiting from internal reforms and external trade dynamics, ensuring robust long-term growth,” Doshi said.

Amit Ganatra, head of equities at Invesco Mutual Fund, highlighted that next year will provide an opportunity to continue participating in India’s growth trajectory, where gains could reach 10-12 percent for several years.

“We are witnessing a slowdown of sorts due to weak government spending and slowdown in credit growth to 10 percent from 14 percent earlier. It is a cyclical problem that can be resolved as the health of government and corporate balance sheets increases. The sectors are strong and household balance sheets are also in reasonable shape,” Ganatra said.

Abhishek Jaiswal, Fund Manager, Finavenue highlighted that the Indian economy continues to stand tall on the global stage, driven by structural growth, robust business fundamentals and strategic policy reforms.

Jaiswal underlined that India’s corporate sector is a crucial pillar for its market strength.

“The country ranks second globally in terms of companies delivering a RoE (return on equity) of more than 20 percent for more than a decade, behind only the US. Nearly 75 percent of Indian companies have grown their book value consistently over the past two decades, with some weathering major crises such as the Global Financial Crisis (GFC) and COVID-19 without a single year of decline. This stability reflects the strength of Indian business fundamentals and their ability to generate sustainable returns for investors,” Jaiswal observed.

He believes emerging industries such as battery energy storage, green hydrogen, biotechnology, semiconductors and AVGC are poised to drive India’s next phase of investment-led growth. India’s decarbonization ambitions, including a target of 500 GW of renewable energy capacity by 2030, further strengthen India’s growth prospects.

Where should Indian investors invest?

Experts see plenty of opportunities in the IT, banking, FMCG and infrastructure sectors.

Deepak Ramaraju, senior fund manager at Shriram AMC, believes sectors like infrastructure, defense and railways could see a recovery if the government ramps up investments in the second half.

Moreover, Ramaraju believes FMCG can see a recovery as its valuation looks attractive.

IT, which has already recovered from its lows after rate cuts, could also do well in 2025 if discretionary spending picks up again, provided Donald Trump does not impose surprise tariffs, Ramaraju said.

Banks may also witness a recovery following rate cuts, resulting in a possible revival in credit growth. Moreover, the recent 50 basis points cut in CRR should boost liquidity and credit growth in the banking sector, Ramaraju said.

Sonam Udasi, Senior Fund Manager at Tata Asset Management, said investors can look forward to more government reforms and capital support in 2025.

Udasi believes looser monetary policy can also stimulate broader credit growth and consumption.

“Sectors such as financial services, EMS (electronics manufacturing services) segment, digital marketplaces and IT could do relatively better,” Udasi said.

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Disclaimer: The above views and recommendations are those of individual analysts, experts and brokerage firms, not of Mint. We advise investors to consult certified experts before making investment decisions.