VOLATILITY AHEAD: PLAY SAFE

After an exhilarating rally till September 2024, the Indian stock market finds itself in turbulent waters and is expected to continue to do so in 2025. We give you some stock picking strategies that will help you play safe. We also have a list of 10 stocks recommended by experts which you can consider for your portfolio

- By Kundan Kishore

After an exhilarating rally till September 2024, the Indian stock market is going through turbulent times. Both the Sensex and the Nifty are down by 9.08 per cent and 10.02 per cent, respectively, as on December 20, 2024, showing a sharp reversal from their recent highs (as on September 26, 2024). It’s not just the external factors that are weighing heavily on Indian equities, even company fundamentals are playing a role.

The primary culprits behind this sharp correction appear to be disappointing corporate earnings and flight of foreign portfolio investors’ (FPIs) money. According to Crisil research, “Domestic financial markets have been facing pressure from FPI outflows since October.”

For the first time in over four years, top Indian companies have reported their weakest quarterly performance ending September 2024, raising alarm bells about a potential economic slowdown. Around 40 per cent of the 50 companies in the Nifty 50 index have either posted negative or muted growth in the last quarter ending September 2024, according to data from trendlyne.​com, a stock analytics firm. To be precise, 16 of them have posted negative profit growth and four neutral profit growth rates. The numbers suggest that high interest rate, lower demand, and muted government and private capital expenditure may have already begun to dent corporate profitability, leaving investors on edge.

Says Ruchit Mehta, head of research at SBI Mutual Fund: “The year 2025 can be volatile, like we have seen in the past few months. For markets to deliver double digit returns, earnings growth has to sharply rebound from the current sluggish levels. This would need revenue and sales momentum to recover and be the primary driver of earnings growth. We could see revenue growth momentum recovering, as economic growth pulls through from the current slow phase, in the second half of 2025.”