As the new year unfolds, investors are closely monitoring Dalal Street’s performance, with January 2025 poised to be a month of heightened volatility. The recent downward trend in December 2024, coupled with critical global and domestic developments, is set to shape market sentiment.
Historical Trends and Challenges in January
Historically, January has been a challenging month for Indian equity markets. The NSE Nifty 50 index has recorded losses in 13 out of the last 20 years, with a notable losing streak in January since 2019. This persistent trend of declines underscores the cautious outlook for the upcoming month.
Adding to market jitters is the upcoming swearing-in of Donald Trump as the U.S. president on January 20, 2025. This event, coupled with a potential delay in rate cuts by the U.S. Federal Reserve, could create ripples in global markets. On the domestic front, India’s Union Budget announcement on February 1 remains a critical event for investors.
Expert Opinions Signal Caution
Market experts have urged caution for January 2025, emphasizing the interplay of global and domestic factors.
Jathin Kaithavalappil, Assistant Vice President at Choice Broking, remarked:
“Domestic equity markets are expected to be cautious in Q1FY2025. Key factors include the Union Budget’s fiscal measures on February 1, U.S. unemployment reports signaling inflationary trends, and creeping inflation in India.”
G Chokkalingam, Founder of Equinomics Research, echoed this sentiment, predicting a weak start to the year:
“A weak rupee, possible delay in aggressive rate cuts by the U.S. Fed, and the forthcoming Budget would delay the return of FIIs’ investments in Indian equities.”
Foreign Institutional Investments: A Mixed Bag
Foreign institutional investors (FIIs) poured ₹3,459 crore into Indian equities in 2024 until December 26. However, they offloaded over ₹1.15 lakh crore worth of shares in October and November, reflecting cautious sentiment in the final quarter of the year. Despite these outflows, FIIs invested ₹1.71 lakh crore in 2023, showcasing the cyclical nature of market participation.
2024: A Year of Mixed Fortunes
The Indian stock market delivered a mixed performance in 2024. While the NSE Nifty 50 gained nearly 10% year-to-date by December 27, the midcap and smallcap segments outperformed. The Nifty Midcap 150 and Nifty Smallcap 250 indices surged 23% and 26%, respectively, during the same period.
Ajay Garg, Director and CEO of SMC Global Securities, struck an optimistic tone for 2025:
“Nifty 50 is expected to cross the 28,000 mark in 2025, but growth may remain non-linear. The current market downturn provides an opportunity to acquire high-quality stocks at lower prices, aligning with the ‘buy low, sell high’ strategy.”
Sectors Poised for Growth in 2025
Several sectors are expected to drive market growth in 2025, including BFSI, FMCG, and infrastructure.
BFSI (Banking, Financial Services, and Insurance):
The BFSI sector reported a 16% year-on-year increase in total income during Q2FY2024. Garg highlighted its potential for sharp growth in 2025, driven by improved asset quality, increased loans, rising financial literacy, and higher investment participation.
FMCG (Fast-Moving Consumer Goods):
Despite facing lower consumer demand in 2024, the FMCG sector is expected to recover strongly. Garg explained:
“Rising consumption, the push for quick commerce, and increased premiumisation will drive the sector’s growth.”
Infrastructure:
With a 12.9% year-on-year growth in total income during Q2FY2024, infrastructure remains a key focus area. Government spending, public-private partnerships, and improvements in logistics and housing development are expected to propel this sector forward.
Outlook for Investors
As January 2025 approaches, investors should prepare for potential volatility driven by a mix of global and domestic factors. While the month may present challenges, it also offers opportunities for those adopting a long-term perspective and a selective approach to high-quality stocks.
