India Market Outlook 2025: Global Brokerages’ Perspectives on Growth and Risks

As we kick off 2025, let’s take a look at what global brokerages are saying about the future of India’s financial markets.

CLSA, in their latest India strategy report, titled Bargain Hunting for 2025, is taking a cautious approach. They predict modest returns for the Nifty, pointing to uncertainties in the global macroeconomic environment, a temporary slowdown in India’s economic growth, and high valuations that are well above historical norms.

One key idea in CLSA’s analysis is the concept of affordable consumption. They believe that rising rural incomes, supported by government welfare programs and favorable agricultural conditions, could boost demand in this sector. However, they caution that high bond yields and overvalued currency levels compared to peers could limit overall market performance.

The firm’s India Focus Portfolio reflects this defensive stance. While the portfolio has outperformed the Nifty by a small margin in 2024, it did experience a significant correction in the last quarter. CLSA has made adjustments for 2025, adding Tata Motors, NTPC, Nestle India, and Britannia Industries to their portfolio, while reducing exposure to financials like HDFC Bank in anticipation of Reserve Bank of India rate cuts.

Other stocks in CLSA’s 2025 India portfolio include Reliance Industries, Tata Consultancy Services, ICICI Bank, ITC, Axis Bank, and more. Staples and commodities are now their largest overweight sectors, with IT, healthcare, and discretionary stocks being underweighted.

On the flip side, Morgan Stanley is quite bullish on India, dubbing it “the market to beat” among emerging markets this year. They anticipate an 18% increase in the Sensex by December, driven by strong earnings growth, fiscal responsibility, and favorable policies.

Morgan Stanley projects a 17% compound annual growth rate in Sensex earnings through 2027, with GDP growth expected to stay steady at 6.3-6.5%. They are optimistic about structural trends like a new private capex cycle and corporates leveraging their balance sheets.

Additionally, Morgan Stanley foresees declining inflation and a gradual easing of rates by the RBI, with two 25 basis point cuts on the horizon for 2025. These factors, combined with India’s low exposure to global market volatility, could help shield the country’s markets from turbulence.