Despite escalating geopolitical tensions, particularly the ongoing conflict between Iran and Israel, the Indian stock market has demonstrated remarkable resilience, with many experts believing that the potential downside has already been factored into market prices. Chakri Lokapriya, CIO, Equities, LGT India, is optimistic about the Indian stock market's prospects, projecting a further 10-12% upside in the Nifty 50 index over the next six months, targeting a range of 27,500 to 28,000 by the end of 2025.
Lokapriya's bullish outlook is underpinned by expectations of an earnings recovery in the coming quarters, suggesting that Corporate India's performance has bottomed out. He believes that the market's ability to absorb geopolitical developments is due to the Reserve Bank of India's (RBI) proactive and consistent policy measures. While acknowledging the potential risks of further escalation in Middle East tensions and prolonged trade uncertainty with the U.S., Lokapriya remains confident in the Indian market's growth trajectory.
Several factors contribute to this positive sentiment. Firstly, the Indian economy has shown strong domestic momentum, with a GDP growth of 7.4% in the last quarter of FY25. The International Monetary Fund (IMF) forecasts India to continue as the fastest-growing major economy, with estimated growth rates of around 6.2% in 2025 and 6.3% in 2026. Secondly, foreign investors have displayed renewed confidence in the Indian market, with substantial inflows recorded in recent months. This is attributed to India's robust GDP growth, a weakening US dollar, and potential US-India trade deals. Thirdly, strong corporate earnings, particularly in sectors like telecom, agriculture, and consumer staples, have boosted market sentiment.
However, it's important to note that rising oil prices, driven by the Israel-Iran conflict, pose a significant risk to the Indian economy. India's heavy reliance on oil imports makes it vulnerable to even small price hikes, which can lead to inflation, slower growth, and a weaker rupee. Sectors like airlines, FMCG, and automobiles may face pressure due to increased fuel and transportation costs.
Despite these challenges, Lokapriya remains bullish on specific sectors, including real estate and banking, ahead of the earnings season. He suggests that investors view market dips as opportunities to align with long-term asset allocation goals, favoring large-cap stocks for their favorable valuations and greater safety margin.
Other financial institutions also share a positive outlook on the Nifty 50. Goldman Sachs projects the index to reach 27,000 by the end of 2025, while ICICI Direct forecasts a high of 28,800. These targets reflect expectations of continued economic growth and strong corporate performance. However, some analysts caution about potential short-term volatility due to high valuations and global uncertainties.
In conclusion, while the Iran-Israel conflict and rising oil prices present potential headwinds, the Indian stock market appears to have largely priced in these risks. With strong domestic fundamentals, renewed foreign investor confidence, and expectations of an earnings recovery, experts like Chakri Lokapriya remain optimistic about the Nifty 50's potential to reach 27,500-28,000 by the end of 2025.
