India’s economic landscape is facing significant headwinds, including a seven-quarter low in growth, persistently high inflation, delayed government spending, and a slowdown in manufacturing and urban consumer demand. Earnings growth has stagnated at 5% year-over-year, signaling limited upside for Indian equities in the near term. “While these challenges are largely transitory, the current economic environment has triggered a de-rating of Indian stocks, limiting their fundamental upside as we enter 2025,” said Malani.
Historical patterns and technical indicators further support this cautious outlook. The number of Initial Public Offerings (IPOs) reached a record 90 in 2024, following trends seen in 2017 and 2021, where historic IPO highs preceded market corrections. Additionally, the market capitalization-to-GDP ratio stands at 147%, significantly exceeding the 10-year average by 50%.
Globally, the incoming U.S. administration in 2025 could bring sweeping changes to monetary policy, trade dynamics, and geopolitical strategies, further unsettling global markets. Potential currency devaluations and a possible rate hike by the Bank of Japan could strengthen the U.S. dollar (DXY) to 112, driving foreign portfolio investor (FPI) outflows from emerging markets, including India.
Despite these challenges, Klay Securities emphasizes that the anticipated market correction will be a “stock-picking market” rather than one driven by trends. Long-term investors are encouraged to leverage this period to identify and invest in high-quality stocks with strong fundamentals.
Klay Securities is part of the Klay Group, a global boutique financial services firm specializing in wealth management, multi-family office services, asset management, and corporate advisory. Known for its innovative, client-centric approach, Klay Group leverages insights from over 4,000+ analysts worldwide to deliver bespoke financial solutions.
