India’s long-term growth story intact, equities to stay buoyant next year: Report

Mumbai (The Uttam Hindu): The structural long-term growth story for India remains intact driven by favourable demographics and stable governance, and Indian equities are likely to stay buoyant next year, a report showed on Tuesday. Private banks, capital goods and digital commerce are projected to see strong earnings growth in 2025, according to a note by ITI Mutual Fund.

In 2024, bellwether indices – Nifty 50 and Sensex -- generated positive returns of 14.32 per cent and 12.55 per cent, respectively. While indices related to different market capitalization – large, mid and small represented by Nifty 100, Nifty Mid Cap 150 and Nifty Small Cap 250 were up by 17.80 per cent, 27.60 per cent and 30.71 per cent, respectively, on an absolute basis. (as on December 13). “Indian equities are expected to perform strongly in the coming year. We believe that sectors like private banks, IT, digital commerce, capital goods and pharma, etc. may have a clearer path to stronger earnings and are expected to perform well,” said Rajesh Bhatia, Chief Investment Officer–ITI AMC.

The Indian economy has shown positive indicators, including an uptick in Goods and Services Tax (GST) collections and favourable Kharif crop sowing numbers. Rural demand has strengthened, with the Purchasing Managers' Index (PMI) and exports showing positive momentum, the note stressed. India is in the midst of an important, multi-year capital expenditure (capex) cycle, which is expected to provide a strong foundation for future economic growth. Private sector investment is projected to hit a decadal high of Rs 55,122 billion, indicating a broad-based growth phase that could accelerate in the coming years, according to the note.

The financial services sector in India is showing promising resilience, with a narrowing gap between bank credit growth and deposit growth, which is expected to ease margin pressures. The banking sector, in particular, has posted strong return ratios and improving capital adequacy levels, reducing the need for fresh capital infusion. Valuations of private sector banks are reasonable compared to the broader market, suggesting stability and long-term potential, the note mentioned.