Investing.com -- Bernstein says “buy selectively” on Indian equities for 2025, given macroeconomic challenges and earnings misses. It projects the Nifty 50 to reach 26,500 by the end of the year, a 12% return.
Bernstein said the Indian economy may have bottomed out, after the September's 5% growth and signs of industrial recovery. While risks to FY26 earnings persist, brokerage suggests the worst of the "mood-spoilers phase" is over.
Indian markets faced significant headwinds in 2024, with a 9.8% drop in equities and a 2.4% depreciation in the rupee during Q4. Weak GDP numbers, earnings misses, and hawkish Fed commentary contributed to the decline.
“Indian economy has slowed, currency is depreciating, Trump-era volatility may be upon us and Chinese policy needs to be watched. Domestic flows have so far been immune to these fundamentals, and it seems they’re investing for India 2200AD, while low-quality IPOs continue getting attention”
Bernstein draws parallels to 2005, another year of mid-cycle corrections that was followed by robust recovery.
Brokerage highlighted that government capex, which had declined throughout 2024, could see a revival in 2025, spurred by a focus on growth in the upcoming budget. Additionally, easing base effects and declining interest rates are expected to support the recovery.
While uncertainties, including geopolitical tensions and the impact of Trump-era volatility, loom, Bernstein argues these are not new concerns, opportunities in the China+1 strategy and IT spending could work as potential positives.
Bernstein acknowledges risks to FY26 earnings and has lowered its target price-to-earnings multiple to 19.5x two-year forward EPS. However, it sees limited downside for the Nifty, estimating a worst-case scenario of 22,000.
Bernstein‘s selective buying measure cautions on small- and mid-cap stocks, which it deems overvalued. Instead, it recommends focusing on large-cap names aligned with structural growth themes.
Bernstein calls to invest ahead of the anticipated recovery, saying India remains in an early-cycle phase, poised for growth in the coming quarters.