Mumbai: India’s GDP growth is set to further improve in the second half this year due to macroeconomic stability, supported by significant foreign exchange reserves and a regulated twin deficit, according to a Motilal Oswal Private Wealth (MOPW) report released on Wednesday.
The report expects India to continue to be among the highest growing major economies despite the recent slowdown in growth. 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 in the US, China’s measures to counter trade tariffs and its possible implications for emerging market (EM) currencies, and the upcoming 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, the report stressed.
“The post-covid period has been extremely rewarding to equity investors driven by earnings growth, improving macros and domestic inflows into equities,” said Ashish Shanker, MD and CEO of MOPW.
The year 2024 has been no different with broader markets doing extremely well. The mid cap and small cap segment have outperformed the large caps. Gold has also done well as an asset class.
“The year 2025 will bring its share of uncertainty as the new US president gets sworn in. After years of good performance, the US markets also look tired. This calls for moderation in expectations and a sharp focus on risk management through asset allocation,” said Shanker.
MOPW recommends closely monitoring the upcoming earnings season and GDP growth trajectory. “We expect this trend to reverse and expect large caps to do better this year given the valuation comfort. In the longer term, earning growth and stock returns should converge,” it suggested.
Despite potential short-term volatility, the medium-term outlook for Indian equities remains positive. This optimism is driven by several factors, including India’s stable macroeconomic environment, likely increase in government spending in the medium term and improving liquidity conditions and monetary stimulus by the RBI.