Indian Equities to Face Near-Term Volatility,
Recovery Expected in H2CY25: Emkay Institutional Equities
•
Nifty projected to reach 25,000 by December 2025
- Positive
on Lupin, Zomato, Tata Motors in large Caps, IndusInd Bank, Escorts, Paytm
in midcap and StoveKraft, Metropolis and Quess Corp in small caps
Mumbai, February 18, 2025: Emkay Institutional Equities, a
part of Emkay Global Financial Services Limited held a virtual media webinar on
the outlook for the Indian equity markets. The research house expects near-term
weakness and heightened volatility for Indian equities in Q1CY25. However, a
gradual consumption recovery is anticipated in H2CY25, led by an improvement in
employment trends, a revival in unsecured lending, and an uptick in welfare
spending. Emkay Institutional Equities project Nifty to be at levels of 25,000
by December 2025, and FPI selling to subside by Q2CY25.
Key sector calls
Emkay Institutional Equities maintains an Overweight
stance on Discretionary, Real Estate, and Healthcare, while remaining Neutral
on Industrials, IT, and Energy. Financials, Staples, and Materials are
designated as Underweight due to structural concerns and valuation
pressures.
The firm anticipates discretionary consumption
recovery within 2-3 quarters, underpinned by a rebound in IT hiring, better
liquidity conditions, and an improvement in retail lending dynamics.
Additionally, state-led women-centric welfare schemes and robust winter crop
sowing are likely to bolster consumption trends.
Sectoral shifts include a downgrade of Energy and
Technology to Neutral, an upgrade of Consumer Discretionary to Overweight,
and continued Underweight positioning on Financials and Staples.
Top investment calls
The firm’s top investment ideas include Lupin,
Zomato, Tata Motors, IndusInd Bank in large caps. Escorts, Paytm, Metropolis in
midcaps, and Stovekraft, and Quess Corp in the small cap segment.
Capex growth
Following a 31% CAGR in capex growth between
FY21-24, a slowdown to 10-13% is anticipated, primarily due to election-related
spending constraints. However, a rebound in FY26 is expected as policy
certainty returns. While capital-heavy sectors face challenges, green energy
continues to be a bright spot.
FPI selling expected to subside
Despite persistent selling pressures, FPI activity
is likely to stabilize post-1QCY25, with valuations having moderated and
earnings forecasts bottoming out over the next 2-3m. A peak in the U.S. Dollar
Index (DXY) should also ease rupee depreciation concerns and help stem FPI
selling. The RBI’s liquidity injection could stimulate domestic equities and
benefit the BFSI sector.
Corporate Earnings
The earnings downgrade cycle appears to be
concluding, with consensus Nifty estimates for FY26 already adjusting downward
by 3.9% since January 2025. The firm remains constructive on mid-teens earnings
growth for FY26, driven by Financials, Metals, and Energy.
Commenting on the outlook, Nirav Sheth, CEO -
Institutional Equities, Emkay Global Financial Services stated: “Markets
tend to over-react and overextend on both, the upside and the downside. The
bottoming process is usually volatile which we are currently witnessing. Our macros
are solid, given the low and stable CAD, fiscal deficit under control, and a
more accommodative monetary policy now. We estimate that the worst of the
earnings downgrade cycle is behind us and expect a recovery in the second half
of the fiscal – triggered by renewed government spending and tax relief
led consumption spend. It is time to buy.”
Seshadri Sen, Head of Research and Strategist –
Institutional Equities, Emkay Global Financial Services added “Despite short-term
headwinds, the structural investment case for India remains intact. The shift
in sectoral dynamics presents opportunities, particularly in Discretionary,
Real Estate, and Healthcare, where we see strong growth potential.”
About Emkay Global Financial Services Limited
Emkay Global Financial Services Ltd., headquartered
in Mumbai, India, is an integrated financial firm offering a wide range of
investment avenues including investment banking, institutional broking, wealth
management, investment management, commodity and currency broking, and estate
and succession planning. Its institutional broking division services clients
across all-important global geographies and its research has received
recognition from important bodies including Thomson Reuters, Institutional
Investors, Asiamoney, and The Wall Street Journal, over the years.
