India stock markets today crashed 1 per cent in intraday trade on Monday, January 13, 2025, leaving investors looking for cover. The BSE Sensex index today tumbled 1,128 points or 1.4 per cent to hit a low of 76,250. The NSE Nifty50, on the other hand, shed 357.5 points or 1.5 per cent to touch a low of 23,047. The BSE MidCap and SmallCap indices, on the other hand, bled over 4 per cent each in the intraday trade.
While the benchmarks have dropped 1 per cent in the first seven sessions of January, they are down up to 11 per cent (Sensex 10 per cent, Nifty 10.8 per cent) from their record high levels hit in September 2024.
Analysts attribute the ongoing correction in the stock markets to a confluence of factors, including profit booking by foreign investors, weak capex by the Central government during the first half of the current financial year (H1FY25), tepid consumer demand triggered by prolonged rains and sharp spike in food inflation, and US President-elect Donald Trump returning to the White House with his protectionist policies.
Besides, fears of a shallow rate cut cycle by the Reserve Bank of India (RBI), amid sticky inflation (back home) and likely inflationary policies by Trump (globally), has added to the currency volatility amid rising yields.
Going ahead, analysts see a slow pace of recovery for the India stock markets, with Trump’s Presidency and the Union Budget 2025, back home, holding the key to the recovery in investors’ portfolio.
When will Indian stock markets recover from ongoing correction? What should investors do now? Stock market prediction:
Prabhudas Lilladher Institutional Equities:
With food inflation having peaked out at 10.9 per cent in October 2024, and the Government trying to accelerate capex spending, we expect gradual economic recovery to set in. We are already witnessing an uptick in ordering momentum in Railways, Defence, Power, Data centers etc, the execution of which will accelerate growth in FY26 and beyond.
We believe the upcoming budget 2025 and Trump 2.0 hold key to market returns.
We expect markets to remain volatile in the near-term but stabilise towards the end of Q4FY25. We would recommend selective buying in current turbulent times for long-term gains given reasonable valuations as long-term India growth story remains intact.
We are turning IT services to overweight and auto to equal weight. We are increasing weights in Capital goods, Healthcare, IT services, and Oil and Gas (RIL). Among stocks, we are removing Hero Moto, Avenue Supermart, and Nestle from model portfolio. We are increasing the allocation for L&T, Siemens, HDFC Bank, Maruti, Britannia, HUL, ITC, Max Healthcare, Infosys, and Reliance Industries.
Emkay Global Financial Services:
The markets should remain weak during Q1CY25, but we expect stability from Q2CY25, with earnings outlook improving and the FPI selling abating by then. We see the Dollar Index rally petering out after the Trump inauguration, as we see minimal risk of a full-blown trade war.
Moreover, India’s earnings downgrade cycle should be done by then, and the froth in valuations has also subsided. We don’t see aggressive FPI buying returning, though.
That said, Q1CY25 could see extreme volatility and spells of intense selling until the dust settles around the geopolitical uncertainties.
As a strategy, we go contrarian and downgrade Technology to ‘Neutral’ on valuations and upgrade Consumer Discretionary to ‘Overweight’ on the expected turnaround. Staples and Financials are our ‘Underweight’ sectors. We are also ‘Overweight’ on Healthcare and Real Estate.
Top stock ideas for CY-2025: We like Lupin, Zomato, and Tata Motors among large-caps; IndusInd Bank, Escorts, and One97 Communications in mind-caps; and StoveKraft, Metropolis Healthcare, and Quess Corp in small-cap stocks.
Kotak Institutional Equities:
The recent sharp correction in the Indian market and stocks across caps does not change our cautious outlook for the market, given full-to-frothy valuations in most parts of the market, low scope for earnings upgrades, and an uncertain global macro-environment and likely higher-for-longer bond yields and interest rates.
In our view, large-cap stocks may hold up better in the next few months while mid-cap, small-cap, and ‘narrative’ stocks will see further severe correction if the alignment to fundamentals and value were to continue. FPIs are unlikely to look at India favorably in a hurry, and retail investors would increasingly contend with dwindling trailing returns.
Yashovardhan Khemka, senior manager – research and analytics at Abans Holdings:
We anticipate a further market correction of 4-6 per cent before the recovery begins. A clearer understanding of Trump’s policies, likely one-two weeks after his inauguration, could help stabilise market sentiment. Investors are advised to adopt a cautious “wait-and-watch”.
Manish Chowdhury, head of research, StoxBox:
Our sense is that downside risks from the current levels looks limited and it would be prudent to build positions in high-quality stocks where valuations are reasonably comfortable from a medium to long term perspective. The upcoming Union budget and the RBI monetary policy meeting in February have the potential to surprise market participants on the upside, by unveiling measures to catalyse growth in the Indian economy.
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