Investors are advised to stagger fresh flows towards equity in the near term to avoid market volatility, according to financial institution Motilal Oswal Private Wealth. It advised investors to keep moderation in expectations. Within equity, investors can look to invest in flexicap category with a bias towards large caps and hybrid equity-oriented funds, says Motilal Oswal.
“The post covid period has been extremely rewarding to equity investors driven by earnings growth, improving macros and domestic inflows into equities. The year 2025 will bring its share of uncertainty as the new US president gets sworn in. Other than global macros even India is facing a slowdown, last GDP estimate was lower than expected values, capex expenditure from government has been slow and earnings growth has slowed down for at least for large cap nifty companies, but despite these headwinds, we continue to be bullish on India growth story”, says Ashish Shanker, MD and CEO Motilal Oswal Private Wealth.
As per Oswal, Indian markets are expected to remain volatile in the first half of 2025 due to several global and domestic events, including the new Donald Trump administration’s policies, China’s measures to counter trade tariffs and its possible implications for emerging markets currencies and the upcoming Indian Union budget. These events are anticipated to create uncertainty in the near term. However, as these events unfold and greater clarity emerges, market volatility is expected to subside in the latter half of the year.
After tepid corporate earnings and slow GDP growth in Q2FY25, Oswal expects strong corporate earnings growth in FY26 and FY27. It expects large caps to do better this year given the valuation comfort. This comes with improved liquidity conditions and monetary stimulus by RBI and continued growth in domestic investments, primarily channelled through mutual funds and systematic investment plans (SIPs), which are mitigating the impact of foreign institutional investor (FII) outflows.
Sharing their view on fixed income market, Oswal said India would be relatively stable due to moderate GDP growth and inflation remaining within the targeted range. However, as a significant portion of the potential decline in yields has already occurred, it advised investors to focus on specific strategies within fixed income, an overweight position in accrual and high-yield strategies while remaining neutral on duration.
When it comes to the outlook for precious metals, view on gold is positive. This positive outlook is supported by several factors — declining share of the US dollar in global reserve currencies, which has been on downtrend over last 10 years and is likely to continue, continued purchases of gold by central banks amid rising geopolitical uncertainties is also driving demand for gold and lastly potential depreciation of the Rupee (INR) against the US dollar is likely to make gold more expensive in INR terms — further supporting its price.
As per MOPW the real estate sector is also showing positive signs, particularly in the commercial segment. India’s office space vacancy rate has fallen to 17.1%, its lowest since 2020, due to heightened corporate demand and low new supply while rents have crossed the pre-covid levels.
