2025 Played out pretty much as I had thought it would. Flatish for the equity markets across the capitalisation band except small caps and an unexpected rally in precious metals. But was there a silver lining? You bet!! Inspite of a lot of money going out of the markets via the foreigner investors route, yet we remained flat. And in such a difficult year, ending where we started is not a mean feat. And this is inspite of a war that could have dragged the world down with it. This is inspite of the fact that the rupee lost a lot of ground. And remember where we were coming from at the beginning of the year or the end of 2024 – flat credit growth and questionable corporate profits growth. A number of IPOs also sucked money from the indices
So who made the markets perform inspite of the obvious challenges and the resilience shown by staying at the same please. It is us!! The retail investors that pumped money via SIP and ULIPs and direct stock buying. So give yourself a big yahoo and say that we are good enough to withstand the exits from big ticket foreign investors.
So what do I expect??
I will stick my neck out and say we are definitely headed for a healthy growth the coming calendar..with the first half being subdued and the second will be much higher. The corporate profits have already increased by 12 percent and we have not seen the translation into stock prices. And with the buoyancy in sales and a positivity in economic activity, the conversion into price growth in stocks is a given. If one is looking for numbers lets say a healthy 12 percent to 15 percent growth in value is what I am expecting. And that is for the large cap indices.
Are corporate profits only going to come from higher sales? No. Cost rationalisation has played a part. Lower credit costs will play a part. Positive sentiments and a large participation from consumers is going to play a part. Overall global sentiments will play a part. For example the Ukraine Russia conflict seems to be resolving and hopefully an end is in sight. This will lead to greater economic activity. The hard rhetorics of the global super power is getting muted and that has a very positive fallout. Imagine if the US-INDIA FTA comes into play. The markets and currency will zoom. And these are real possibilities.
For once we have a sweet spot moment. GDP on the rise in a faster mode with lower interest costs and a larger, willing to spend consumer base equals higher likelihood of the markets hitting highs. We did touch an all time high in the large cap index but it was so fleeting that it did not leave any impact.
So why are so many portfolios showing such lousy annual returns? That is because of the dominance of mid and small caps in these portfolios. But if you have not exited them then DON’T. The time for these to make a comeback is ripe. Stay invested and you will reap the benefits. But the lesson should not be forgotten. Don’t lump your money in a segment that is performing. Also pick segments that are not and you will see money in various cycles. Remember how China and Latin America underperformed for two years and made it all up in 2025. This is the way. Allocate. That’s your only job. Don’t try and second guess. The market has the habit of putting down smart pants.
And what should we be worried about? The INR health is a no brainer. Adverse eco political situations. Sudden adverse legislations. Social stability and political stability are obvious desirable conditions.
Things will happen. Gold and silver will remain buoyant for the first half but will stabilise. If you have not bought them yet, then don’t buy. This is an opportunity for a longer horizon vision and the I earnestly ask you to not waste it.
Happy New Year and a wishes for a great 2026.
