NEW DELHI: With the start of the new year and significant global & domestic developments on the horizon, investors are actively exploring opportunities to allocate their funds. Although the recent market sluggishness suggests that returns this year may not replicate the bull run witnessed in local equities between mid-2020 and September 2024, certain sectors appear to hold promise.
Many market analysts said that banking stocks may stage a comeback in 2025 owing to healthy valuations and favourable cues. In the last one year, the Nifty Bank index has given a return of about 6%, significantly lower than the 9% gain made by the benchmark Nifty50 index. Analysts also bet on sectors such as consumption, manufacturing and infrastructure.
“On the Sectoral front, we remain constructive on Banking & Financial Services given the reasonable valuations and higher return ratios - ROE (Return on Equity) and ROA (Return on Assets). We are also hopeful of a revival in consumption and positive on manufacturing given the government’s thrust and China+1 strategy,” said analysts at Mirae Asset Mutual Fund.
The fund house remains constructive on equities from a medium-term perspective driven by strong profitability and free cash flows.
It stated that key things to watch out for in 2025 are: US policy on trade/tariff, fiscal expenditure and deregulation; Rate trajectory by the central banks; Oil price trend; Geopolitical issues; Recovery of onsumption; and Private capex growth including Real estate.
In CY 2024, pharma, realty, IT and auto stocks dominated the buying trend. In general, the year was good for most of the sectors apart from Bank and FMCG (Fast Moving Consumer Goods) with FMCG Index dipping almost 15% in the last three months primarily due to poor earnings and weak commentary.
Anand K Rathi, Co-Founder of MIRA Money, believes that India’s infrastructure is poised for rapid growth as the government’s massive investment of over R100 lakh crore in roads, ports, railways, and more will create significant opportunities.
Companies involved in infrastructure development, particularly those with robust project pipelines, are expected to see strong growth over the medium term.
On the banking sector, Rathi said that Indian banks are in a solid position with low non-performing asset (NPA) levels and strong loan books. With an anticipated rise in private capital expenditure, banks, especially those at attractive valuations, offer a secure investment option.
Besides banking, consumption and infrastructure, analysts also remain bullish on the pharma and healthcare sector.
On stock selection, Axis Securities shared their top nine stock picks. The brokerage’s top picks are Shriram Finance Ltd, Fortis Healthcare Ltd, Prestige Estates Projects Ltd, City Union Bank Ltd, Ambuja Cements Ltd, DOMS Industries Ltd, Ethos Ltd, Bharti Airtel Ltd and Cipla Ltd.
Ross Maxwell, Global Strategy Operations Lead, VT Markets said that as India looks to meet its ambitious sustainability goals, the renewable energy sector stands out. A push towards clean energy solutions will attract investment and fuel growth in industries such as green tech.
He stated that fintech, e-commerce, and IT services are other sectors that can still see large growth, supported by India’s growing digital ecosystem, the rise of 5G networks, and government programs.