LGT Wealth India's CIO Equities, Chakri Lokapriya, has provided insights into the Indian stock market, covering various sectors from financials to real estate. Lokapriya anticipates a 10-12% Nifty gain for CY2025, contingent on US tariff negotiations. He suggests that investors should focus on stocks with strong earnings visibility in a stock picker's market.

Overall Market Outlook

The Indian stock market is expected to remain volatile, influenced by ongoing geopolitical tensions and news flow. However, the economy is on track for the growth targeted by the RBI and the Indian government. A stable external environment, proactive monetary and fiscal policies, and robust domestic demand create a favorable climate for sustained investment flows.

The market is trading at roughly 20x one year forward, which is below the 5-year mean, indicating that there is no excessive froth in valuations and setting the stage for potential upside, provided there are no significant geopolitical escalations.

Fixed Income Strategy

Lokapriya advises allocating 20-30% of portfolios to fixed income to provide stability amidst market volatility, viewing it as a "seatbelt". This allocation to high-quality bonds is particularly important in the current uncertain global environment.

Impact of Rate Cuts

The cumulative 100bps rate cut significantly reduces borrowing and working capital costs, especially for capital-intensive sectors like power utilities (thermal/renewable) and mining. The RBI is likely to stay on course with two additional rate cuts of 50 basis points for the remainder of 2025 unless there is a marked rise in border conflict.

Sectoral Expectations

• Financials: Financial services companies present short-term opportunities while being fundamentally strong sectors. The sector has seen the most misses in earnings, but aggregate profit after tax (PAT) growth has returned to positive territory.
• Real Estate: Company guidance indicates slightly higher earnings growth expectations for FY26-27, especially in cyclical sectors like real estate. Construction activity has gained momentum, with steady improvement in related indicators. Godrej Properties is expanding into new areas, acquiring land for residential projects.
• Consumer Staples: The sector has seen the most misses in earnings, and large-cap FMCG EPS growth will likely be weaker than consensus expectations.
• Healthcare: Hospital companies present short-term opportunities while being fundamentally strong sectors.
• Technology: While sectors like IT have seen the most misses in earnings, electronics and semiconductors are highlighted as promising sectors.
• Infrastructure: Infrastructure spending is poised to benefit ahead of the upcoming budget, potentially accelerating revenue growth.
• Energy: Energy is highlighted as a promising sector, and company guidance indicates slightly higher earnings growth expectations for FY26-27 in cyclical sectors like energy.
• Defence: Defense companies present short-term opportunities while being fundamentally strong sectors.

Small and Mid-Cap Opportunities

The mid cap sector is expected to grow at 17% to 20%, outpacing the 8% to 10% growth of large caps. The NIFTYNEXT50 has shown stronger year-on-year growth.

Geopolitical Impact

Geopolitical tensions, particularly those involving India and Pakistan, are expected to keep the market volatile. Drawing a parallel to the Kargil conflict, continued volatile news flow will likely impact market sentiment.

Other Considerations

Gold continues to be a hedge against inflation and an investment vehicle. Investors should also monitor the US tariff negotiations, as the outcome will significantly influence market direction.