India’s Market is Expected to Drop 5% in the First Quarter of 2025 as Economic Growth Decelerates

Some investors expected a quarterly decline in India's stocks as slowing economic growth and inflexible inflation reduced corporate earnings and foreign inflows.

The benchmark Nifty 50 index is likely to fall at least 5% in the three months to this March, according to an unofficial survey involving 22 strategists and fund managers. Concerns over geopolitical tensions over US President-elect Donald Trump's presidency have dampened India's market further.

Panic of foreign capital outflows triggered by decreasing consumption has weakened the nearly $5 trillion Indian market. The total market capitalization of the constituent companies of MSCI India Index has shrunk $556 billion, down more than 13% from its Septemer peak.

Mohit Khanna, a fund manager at Purnartha Investment Advisors, admitted that several domestic and global developments in 2024 have made the Indian market negative and uncertain.

The latest government data shows that the Indian economy will grow 6.4% this fiscal year, much lower than the 8% average of the last three years, fueling concerns about India's growth outlook.

Last week, HSBC Holdings Plc $HSBC downgraded Indian stocks to neutral, saying investors might reassess their positions. Previously, the market generally cut fiscal year 2025 earnings growth estimates for the Nifty 50 to 5% from 15%.

Vikas Gupta, chief investment strategist at OmniScience Capital, said that in the short term, India was at a turning point in its economic boom. However, the rate cut will determine the general direction of India's market. He expects the market to rise over 10%.

Likewise, one-third of the survey respondents expected the Nifty 50 index to rise 10% to 15% by 2025, given the sustained inflow from domestic investors. Respondents also expected healthcare and information technology stocks to be the top gainers in 2025, thanks to the record-low rupee.

Dong Chen, chief Asia strategist at Pictet Wealth Management, maintained neutral on India's market. Yet, he said when earnings growth became positive, investment institutions would try to elevate their positions in India.

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