Outlook 2025: Top fund managers remain bullish on Indian stock market, suggest these 4 sectors to invest in | Stock Market News

Market veterans and several fund managers of some of India’s top fund houses believe the Indian stock market remains well-positioned to grow despite global challenges and risks arising from sticky inflation and elevated interest rates.

Most of them believe the slowdown in the Indian economy, observed during the first half of the current financial year, could fade away with increased capital expenditure from the government and corporates. Some of them emphasise that the revival of consumption and investment will be the key triggers for the Indian stock market next year.

Bullish on the Indian stock market

Fund managers are bullish on the Indian stock market as they don’t see any structural issue with the Indian economy. 

Even though the latest macroeconomic numbers indicate that economic growth is slowing, fund managers seem less perturbed. They view the economic weakness as cyclical, largely attributed to low government spending due to national and key state assembly elections, as well as an erratic monsoon. They expect that, with the monsoon behind us, increased government spending and consumption will boost the economy in the second half of the year.

“The Indian economy may gradually recover as government and corporate spending increase. We expect a gradual recovery in spending and, hence, GDP growth going forward. Easing global geopolitical tensions and a strong dollar would mean that commodity prices will likely remain under control. This is certainly good news from India’s perspective,” said Shiv Chanani, Senior Fund Manager – Equity, Baroda BNP Paribas Mutual Fund.

Karan Doshi, Fund Manager – Equity at LIC Mutual Fund Asset Management, also pointed out that looking beyond short-term fluctuations, India is poised for a new growth cycle.

Doshi underscored the significant opportunity in the ongoing trend of supply chain diversification as the world seeks to reduce reliance on China.

“This shift allows India to become a significant global supply chain network player. Its competitive advantages—such as a large, youthful workforce, improving infrastructure, and strategic location—position it as an attractive destination for global supply chains,” said Doshi.

Doshi believes favourable demographics, rising productivity, and the government’s focus on infrastructure, digitalisation, and manufacturing may drive sustained growth.

“With a growing middle class and a favourable business environment, India can emerge as a key global economic player, benefiting from internal reforms and external trade dynamics, ensuring robust long-term growth,” Doshi said.

Amit Ganatra, Head of Equity at Invesco Mutual Fund, emphasised that next year will offer an opportunity to continue participating in India’s growth journey, where earnings can compound at 10-12 per cent for several years.

“We are witnessing some sort of slowdown due to weak government spending and a slowdown in credit growth to 10 per cent compared to 14 per cent earlier. It’s a cyclical problem that can be resolved as the health of the balance sheets of the government and corporate sectors is strong, and household balance sheets are also in reasonable shape,” said Ganatra.

Abhishek Jaiswal, Fund Manager of Finavenue highlighted that India’s economy continues to stand tall on the global stage, driven by structural growth, robust corporate fundamentals, and strategic policy reforms.

Jaiswal underscored that India’s corporate sector is a critical pillar of its market strength.

“The country ranks second globally in companies delivering over 20 per cent RoE (return on equity) for more than a decade, behind only the US. Nearly 75 per cent of Indian firms have consistently grown their book value over the last 20 years, with some weathering major crises like the GFC (global financial crisis) and COVID-19 without a single year of decline. This stability reflects the strength of India’s corporate foundations and their capacity to drive sustained returns for investors,” Jaiswal observed.

He believes emerging industries such as battery energy storage, green hydrogen, biotechnology, semiconductors, and AVGC are poised to fuel India’s next phase of investment-led growth. India’s ambitions to decarbonise, including a target of 500 GW renewable energy capacity by 2030, further bolster its growth prospects.

Where should Indian investors invest?

Experts see ample opportunities in the IT, banks, FMCG and infra sectors.

Deepak Ramaraju, Senior Fund Manager at Shriram AMC, believes that with the government stepping up investments in the second half, sectors such as infrastructure, defence, and railways may witness recovery.

Moreover, Ramaraju believes FMCG could witness recovery as its valuation looks attractive.

IT, which has already recovered from its lows after rate cuts, may also do well in 2025 as discretionary spending picks up, provided Donald Trump does not impose surprise tariffs, Ramaraju said.

Banks may also witness recovery post-interest rate cuts, resulting in a possible pick-up in credit growth. Moreover, the recent 50 bps cut in the CRR should boost liquidity and credit growth in the banking sector, said Ramaraju.

Sonam Udasi, Senior Fund Manager at Tata Asset Management, said investors may look forward to more government reforms and capex support in 2025.

Udasi believes a more relaxed monetary policy may also trigger broader credit growth and consumption.

“Sectors like financial services, the EMS (electronics manufacturing services) segment, digital marketplaces, and IT could do relatively better,” said Udasi.

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