Correction risks loom, says Ajit Mishra of Religare Broking, suggests THESE banking, IT stocks to buy | Stock Market News

Expert view: Indian investors should be prepared for market volatility and expect modest growth from the Indian stock market, says Ajit Mishra, SVP of research at Religare Broking. He adds the domestic market will likely shift into a consolidation or modest growth phase, with potential corrections driven by external shocks or valuation pressures. In an interview with LiveMint, Mishra shares his views on markets and picks stocks to buy next year.

Edited excerpts:

What key triggers will shape the Indian stock market in 2025?

Global factors are likely to remain in focus initially. A change in the US administration could lead to shifts in trade policies, such as higher tariffs, potentially disrupting global trade and prompting India to reassess its trade agreements, adding an element of uncertainty.

On the positive side, a resolution of ongoing geopolitical conflicts could stabilise global markets and encourage investments.

Domestically, corporate earnings are expected to recover, driven by increased government spending and higher private-sector investments.

However, inflation could rise as governments prioritise growth through elevated expenditure, which might impact consumer behaviour and purchasing power.

These dynamics will present both opportunities and challenges for businesses and investors in India, underscoring the need for strategic planning and adaptability.

Are we in the last leg of the bull run that started post-pandemic?

Markets have maintained an upward trajectory over the last nine calendar years, interspersed with periods of correction and consolidation.

Considering the current economic environment, some level of consolidation cannot be ruled out, although the long-term outlook remains positive.

When central banks start lowering interest rates in response to slowing economic growth, it often marks the later stage of the economic cycle, a phase where market performance tends to soften.

While we may not yet be in the final leg of the bull run, the straightforward gains of the post-pandemic rally appear to be behind us.

Markets will likely shift into a consolidation or modest growth phase, with potential corrections driven by external shocks or valuation pressures.

What strategy should retail investors adopt to make money in the Indian market next year?

Long-term investors should prioritise high-quality stocks with robust fundamentals and be prepared for periods of market volatility.

Setting realistic return expectations and avoiding leverage is essential.

Market fluctuations can present opportunities to accumulate fundamentally strong companies with solid growth potential.

Adopting a disciplined, long-term investment approach focused on quality stocks rather than speculative plays is crucial.

Diversifying across sectors and asset classes helps manage risk effectively.

By remaining patient, concentrating on value, and steering clear of short-term market noise, retail investors can navigate challenges and position themselves for sustainable growth.

How to play the mid and small-cap segments next year?

The valuation outlook for India’s mid and small-cap segments is mixed for the coming year. While these segments are trading above historical averages, suggesting overvaluation, there remain areas with attractive valuations.

To navigate this, a bottom-up investment approach is essential, prioritizing companies with strong earnings visibility and reasonable valuations.

A selective, value-oriented strategy will be critical for effectively capitalising on opportunities in the mid and small-cap space next year.

How to spot a potential multibagger?

Look for companies with robust financial performance, steady revenue and profit growth, and a solid balance sheet with manageable debt.

A sustainable competitive advantage, such as proprietary technology or strong brand loyalty, is essential for long-term success.

Evaluate the quality of management and target industries with strong growth potential. Prioritize companies with low debt levels and positive free cash flow, as these signify financial stability.

Lastly, ensure the stock is reasonably valued to enhance investment potential while maintaining patience for long-term returns.

Could you recommend some banking stocks to buy next year?

HDFC Bank, ICICI Bank, and SBI are our top banking picks for 2025. Despite facing post-merger challenges such as a high CD ratio and compressed NIMs, HDFC Bank is making significant progress in deposit growth, which is expected to improve NIMs and fuel its growth trajectory. 

ICICI Bank continues to excel with consistent outperformance across key metrics, supported by strong fundamentals and attractive valuations, making it a compelling accumulation opportunity. 

SBI stands out for its strategic investments in technology, which are enhancing its opex-to-income ratio and overall profitability. With a lower CD ratio, SBI is well-positioned for growth above the industry average and offers appealing valuations. These stocks provide a well-rounded combination of growth potential and financial stability.

What IT stocks are you positive about at this juncture?

We remain optimistic about TCS’s long-term growth, driven by its market leadership, exceptional execution capabilities, diversified portfolio, and industry-leading margins. 

A gradual recovery is anticipated in FY25, supported by the ramp-up of deal wins and growing momentum in Generative AI initiatives. 

Similarly, HCL Technologies is well-positioned for growth, leveraging its diversified offerings across IT services and ER&D, along with strong execution. 

The expected rate cut cycle will likely boost demand further, enhancing its growth prospects.

Would you recommend betting on new-age tech stocks such as Zomato and Swiggy for the medium term?

Investing in stocks like Zomato and Swiggy presents significant growth potential due to their dominance in India’s food delivery market and improving unit economics. 

Zomato’s initiatives, such as Blinkit and Hyperpure, further enhance its prospects. However, high valuations and profitability concerns make them risky bets in the short to medium term. 

It’s important to monitor their financial performance and competitive positioning carefully. Instead of rushing in, a prudent approach would be to wait for more reasonable valuations, striking a better balance between risk and reward for these high-growth yet volatile opportunities.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.