Invest Guide March 2025

Dear Investors,

As we enter 2025, India's financial landscape shows both optimism and caution. The Union Budget 2025 has significant implications, with GDP growth projected at 6.5%, supported by strong domestic demand and manufacturing.

Despite global uncertainties, India's growth prospects and government initiatives offer long-term potential. With a cautious outlook, we remain focused on navigating the evolving market to create value for investors. Let's explore the latest updates.

The Union Budget 2025 -

The Union Budget 2025 emphasizes long-term economic sustainability through investments in infrastructure, renewable energy, and digitalization. Key allocations support clean energy and governance digitization to boost growth. The new tax regime makes income up to ₹12 lakh tax-free, easing the burden on salaried individuals and businesses while fostering a growth-friendly economic environment.

In February 2025, India's Manufacturing PMI dropped to 56.3 from 57.7 the slowest expansion since December 2023, due to weaker output and sales. However, it stayed above 50, indicating continued growth. Meanwhile, CPI inflation fell to 4.31% in January, its lowest since August 2024, driven by lower food prices. Easing inflation may give the RBI room for potential rate cuts to support growth.

The Union Budget 2025 -

The RBI's decision to maintain the repo rate at 6.25% reflects a cautious yet strategic approach to long-term economic resilience along with inflation control. This decision demonstrates the RBI's commitment to ensuring stability amid global uncertainties and rising commodity prices.

Impact of Rising Dollar and Weakening Rupee on Indian Markets -

The strengthening U.S. dollar and weakening rupee have led to foreign portfolio outflows, increasing market volatility in India. A weaker rupee has raised import costs, particularly for crude oil, worsening inflationand the trade deficit. However, export-driven sectors like IT and textiles benefit from improved competitiveness. The rupee's recovery hinges on stabilizing capital flows, reducing the trade deficit, and RBI interventions. With improved global conditions and domestic indicators, the rupee could appreciate in late 2025, easing inflation and attracting foreign investment, which would stabilize the market.

Q4 FY25 Earnings Outlook and Market Implications -

India's Q4 FY25 corporate earnings are expected to improve, with Nifty 50 companies projected to see 5.9% revenue growth, 8.6% EBITDA growth and 6.9% PAT growth YoY. This recovery could stabilize markets and foster cautious investor optimism.

FII activity & Indian Stock Market -

In January, Indian equities saw a $11.75 billion foreign investment outflow due to rising U.S. Treasury yields and a strong dollar. On February 28, the Sensex fell 1.90% and Nifty 1.86%, impacted by global uncertainties and proposed U.S. tariffs. IT and financial sectors faced major losses, while Mahindra & Mahindra, Kotak Mahindra Bank, Maruti, Nestle, and ITC led the gains. India's long-term market fundamentals remain strong.

"The current market environment remains uncertain due to global volatility, a fluctuating US dollar, and domestic inflation. In the short term, caution is advised, but the medium-term outlook is positive, driven by infrastructure growth and corporate earnings. Investors should adopt a phased approach via SIPs or STPs to manage risks."

Market Correction: A Buying Opportunity for Long-Term Investors

The Indian equity markets have seen a sharp correction, with the Nifty 50 down 15% from its September 2024 high, while midcap and small-cap indices have fallen over 22-25%. Factors such as weak earnings, foreign outflows, global uncertainties, and inflation have contributed to this downturn. However, history shows that market corrections present long-term investment opportunities, as seen in 2008 when the Nifty 50 rebounded nearly 7x in 15 years.

Currently, large-cap valuations are nearing fair value, with the Nifty 50's PE at 19.9x, but mid and small caps remain expensive. A strategic approach would be to deploy 30-35% of available funds now and add on dips. Potential catalysts like interest rate cuts and policy reforms could drive future growth. Sectors like FMCG, consumer durables, infrastructure, and chemicals appear attractive.

FII activity & Indian Stock Market -

The market remains uncertain due to global volatility, a fluctuating US dollar and domestic inflation. While caution is advised in the short term, the medium-term outlook is positive, driven by infrastructure growth and corporate earnings. Investors should consider phased approaches like SIPs or STPs to manage risks.

Conclusion -

While external headwinds persist, India's economic resilience offers long-term opportunities. Staying informed, diversified, and disciplined will be key to navigating market challenges and capitalizing on India's growth potential.