Indian Corporates Poised for Earnings Growth in 2025

Mirae Asset Mutual Funds' 2025 outlook anticipates improved corporate earnings and robust macro fundamentals in India, while emphasizing balanced investment approaches. Though high valuations persist, bottom-up stock selection remains key. The report highlights sectoral confidence in Banking, potential upswing in consumption, and global political impacts from US trade policies.

In its latest Annual Market Outlook for 2025, Mirae Asset Mutual Funds projects a promising boost in earnings for Indian corporations, which could translate into higher returns as the new year unfolds. The report underscores that despite lofty valuations, mid and small-cap equities yielded double-digit returns, validating investor trust in stocks.

While stocks continue to dominate as the favored investment class due to their attractive return potential, the report suggests diversification among asset types to mitigate risk. India's strong macroeconomic landscape, characterized by low household debt compared to global averages and a robust fiscal regime, positions it for sustained growth in the medium to long term.

The report remains cautiously optimistic about equities, propelled by favorable profitability metrics and free cash flows. It emphasizes the importance of meticulous bottom-up stock selection due to frothy market sections, with particular confidence in the Banking and Financial Services sectors owing to sound valuations and attractive return ratios.

Mirae Asset's outlook also noted the potential for increased consumption and manufacturing growth, driven by government initiatives and strategic positioning like the China+1 policy. The global political scene, especially the U.S. administration's impending policy shifts in trade and immigration, could influence international financial markets and trade dynamics, adding an element of uncertainty.

The year 2024 marked significant political shifts globally, with elections in major economies including India and the United States, potentially leading to policy shifts. Indian capital markets saw an unprecedented rise in primary equity issuances, while domestic investors remained prominent buyers in the secondary market. Conversely, Foreign Portfolio Investors (FPIs) have been hesitant due to valuation concerns. However, the report suggests that any substantial market corrections might encourage FPI inflows.

(With inputs from agencies.)