New Delhi, January 2: Indian corporates are expected to report improved earnings in the upcoming quarters, which could drive market returns in 2025, according to Mirae Asset Mutual Funds’ Annual Market Outlook report. Despite higher valuations at the start of the year, the report noted that equities performed well in 2024, with mid and small-cap stocks delivering double-digit returns.
The report highlighted that stocks remain a favored investment option due to their potential for strong returns. However, it emphasized the importance of diversifying investments across various asset classes—such as stocks, bonds, and others—to mitigate risks.
Looking ahead, Mirae Asset remains optimistic about India’s medium to long-term economic outlook, citing factors like strong macroeconomic fundamentals, improved corporate balance sheets, fiscal discipline, favorable demographics, digitization, and rising income levels. The report also pointed out that household debt levels in India remain reasonable compared to global standards, with India’s debt-to-GDP ratio lower than in 2010, while global debt levels have increased.
“We remain positive on equities from a medium-term perspective, driven by strong profitability and free cash flows,” the report stated. “Earnings growth will likely be a key driver of returns in 2025. However, with valuations at a premium and froth in certain market segments, bottom-up stock selection will be crucial.”
On the sectoral front, the report expressed confidence in the Banking & Financial Services sectors, noting reasonable valuations and higher return ratios (ROE and ROA). It also remains optimistic about a revival in consumption and is positive on the manufacturing sector, driven by government initiatives and the China+1 strategy.
Looking back at 2024, which was marked by elections in major global economies, including India and the U.S., the report observed that while India has seen policy continuity, the evolving U.S. administration’s policies on trade, immigration, deregulation, taxes, and government expenditure could impact global markets.
The report also noted a record surge in primary equity issuances in Indian capital markets, with domestic investors remaining strong buyers in the secondary market. Foreign Portfolio Investors (FPIs) have been cautious, holding back due to high valuations, but any significant correction in Indian equities could prompt FPI inflows, the report concluded.