Investors looking to make systematic investment plans (SIPs) can look at large-cap funds and those wanting to make lump sum investments can invest in multi asset allocation funds at the current markets, says Nilesh Shah, MD Kotak Mahindra Asset Management. He also says that FIIs will return to India due to strong earnings growth.
He said, “Our earnings growth is better than other countries globally. On an average in the last 10 years, Chinese earnings per share went up by 10%, compared to Nifty which went up by 166% which is over 16 times more than China in their respective currencies.”
While addressing the media on market outlook 2025, he said that the strength of India lies in its entrepreneurship capabilities, capital availability and infrastructure which is fuelling the India growth story. He is bullish on IT, pharma, FMCG, consumer staples, telecom and financials and has worded caution for infrastructure, defense, railway and capital goods. He has also advised the investors to not expect returns like the past 4 years and lower their expectations. He said, “Invest with moderate return expectations and if you understand the company then go ahead and invest directly otherwise go for mutual funds.”
On the economic performance of India he said, “The country’s economic performance in the first half of the fiscal year has been mixed. Second-quarter GDP came in below expectations, with subdued growth in key indicators like cement volumes, passenger vehicle sales, and corporate income tax collections.”
Though Shah sees opportunities for recovery in the second half. “The festival and wedding seasons are driving a resurgence in consumption. With around 4.8 million weddings expected, generating spending of about Rs 6 lakh crore, the second half (of FY25) looks better,” Shah said.
Talking about the themes the fund house is predicting a recovery in the capex cycle with central government and corporate spending taking a lead in this category. According to Kotak MF, financial services are also seeing reasonable valuations. Thirdly, one of the key themes for 2025 is the rise of generative AI. AI demand is expected to grow 15x from 2022 to 2027. Fourthly, India’s rural consumption sector is showing signs of recovery. India’s consumption has shown a mixed recovery post-COVID, with premium products doing well while mass consumption lagged. Urban areas have outperformed rural consumption so far but reversal in trend is expected in the coming time. Also, nuclearization of families has gone up from 34% in 2008 to 50% in 2022 which would structurally drive consumption demand. Lastly, healthcare spending is set to increase with the rise in per capita GDP. As the population ages, there’s a global trend of increasing medical spending. India is well-positioned to meet this growing demand, being a major producer of pharmaceuticals and vaccines.
On the fixed income side with interest rates on a structural decline but expected fluctuations, focusing on longer-duration instruments—ideally with a 12 to 18 month horizon would allow investors to benefit from potential future rate cuts, says Deepak Agarwal, CIO Debt, MD Kotak Mahindra Asset Management . As per the report, RBI is likely to cut rates by 50-75 bps between now and Dec 2025. The combined centre and state deficit for FY 26 is expected to close near 7%, could lead to an India rating upgrade in. FY 26. Favourable macroeconomic conditions, potential rating upgrades, balanced demand-supply dynamics, and rate cuts are likely to lead the 10-year G-sec yield to trend lower, trading in the band of 6.25% to 6.50%. This makes fixed income investments a compelling opportunity for those seeking sustainable returns in the current market scenario, says Agarwal.