Ready, steady and go!

The precondition of uncertainty and fear is essential to create hope and optimism, as any student of psychology would know. With a solid foundation built on uncertainty, the year 2025 may well end with hope and optimism riding high again. This renewed sentiment could play out in the stock markets in the few sessions left this year.

Sentiments are riding high, and one may expect to see the markets deliver double-digit returns this year. To date, the BSE Sensex has returned 8 per cent over the last 12 months. From January 2025, it has been lower, at 6 per cent. It will have to go up by another 1,650 points to provide double-digit returns. Given the rising sentiments, this is quite possible.

The Sensex, despite the rising base, has given double-digit returns five times since 2016. What is heartening is that, in none of the past 10 years has the Sensex delivered negative returns. Over the last 10 years, the Sensex has given a cumulative return of 226 per cent to date (see table). This year, if the Sensex gives double-digit returns, it will also create a record of sorts, as it will be at a record high, bettering its 52-week high of 85,290 reached earlier this year on 23 October 2025.

There are several factors which could propel the Sensex to a new high: better-than-expected corporate results, some closure to the vexatious tariffs imposed by the USA, good performance by the NDA in Bihar, as expected, besides several policy measures in the offing. Another factor that can work in India’s favour is that it has been trailing other emerging markets, viz Brazil, Russia, China, and South Africa. It can certainly play the catching-up game with countries that have given more than double-digit returns. “The Sensex or Nifty are like the car which picks up momentum when the brakes are released,” says Deven R Choksey, founder and MD, DR Choksey FinServ, a boutique fund and wealth management company. “I am very bullish and expect markets to soar through the roof in 2026.”

Uncertainties and consolidation

Most experts with whom Business India spoke were of a similar opinion. Jyotivardhan Jaipuria, founder and MD, Valentis Advisors, points out: “India was the worst-performing market amongst the major emerging markets and, after several years, India was underweight by 2.5 per cent.” South Africa, to date, is the best-performing market, having given 38 per cent returns, followed by Brazil, China and Russia. Indian markets, since 2 January, have only given 8 per cent.

More than enough has been written about the uncertainties eclipsing the markets globally since the beginning of the year: Trump and the tariff imposition, relaxation, reimposition, and more penal tariffs. Penal tariffs of 25 per cent were imposed on Indian imports, over and above the 25 per cent tariffs. There were also challenges with the H1-B visas. FPI withdrawal from emerging markets, including India, in favour of the US market also created a temporary blip, but with DIIs and mutual funds, along with retail investors, reposing faith in the India growth story, markets remained in a blissful calm compared to the global upheavals.

Gold and silver’s spectacular marathon, fuelled by central banks’ newfound liking for gold and the dumping of dollars, unfolded even as several geopolitical factors escalated, including the ongoing wars between Russia and Ukraine and Israel and Hamas. There were also smaller conflicts between Israel and Iran, Thailand and Cambodia, as well as Pakistan and Afghanistan. India’s war on Pakistan’s terror regime, dubbed Operation Sindoor, also chastened the terrorists, post the Pahalgam massacre. China’s defiance of the US and its refusal to allow the export of critical minerals, and fears about inflation rearing its head in developed countries, were just a few of the factors that sent markets on a roller-coaster ride across the globe. There was a lot of negativity built in, which saw the markets trading in a narrow band.

The reasons for the rerating of markets are not far to seek. “The Indian economy is in amazing shape,” says Vijai Mantri, co-founder and chief strategist, JRL Money. Claiming that Trump’s actions have provided legitimacy for countries to take protectionist measures, Mantri explains that with India being a net importer, the government has taken several steps to produce import-substitute items. All segments of manufacturing will do well, he says, including defence and aerospace engineering. Mantri is particularly bullish on the consumption story and feels energy and healthcare will perform well, going forward. He says the Nifty 50 does not adequately capture the growth which is happening in India.

Being a largely domestic-led consumption economy, the tariffs did not harm the Indian economy as they would have if it were an export-led economy. Indeed, certain industries like textiles, aqua products, and gems and jewellery were impacted, but by and large, India did well and stayed on its growth path.

“Indian markets have seen a broad-based recovery in recent weeks, supported by a resilient macro backdrop, steady domestic demand and foreign inflows. In the near term, the market outlook remains constructive underpinned by strong capex trends, policy continuity, and a potential India-US trade agreement,” says Anand Shah, CIO, PMS and AIF, ICICI Prudential AMC.

Corporate results

Sentiments are high, with investors betting big on the India growth story. Corporate results have been much better than expected, with PAT of non-financial companies in the first quarter growing by 23.6 per cent and 16.2 per cent in the second quarter, as per CMIE’s estimates. Expectations are that companies will continue to perform well in the next two quarters, thanks to the government’s measures of lowering GST rates and concessions in income tax, spurring consumer demand. This is reflected in the BSE S&P Auto Index rising by 17 per cent from January to date. This is more than twice the gains of 8 per cent posted by the Sensex during the same period.

“The worst is certainly behind us,” says Aniruddh Sarkar, co-founder, Equinova Investment Managers, a newly formed AIF and PMS firm. “FIIs, which had turned negative, will start looking at Indian markets afresh as sentiments turn positive.” FIIs have been negative for all five months since July 2025, and for the period from January to date, they have been net sellers to the tune of Rs1.40 lakh crore ($16.5 billion), according to CDSL records. Besides sell-offs due to hopes of better prospects in the USA, many also chose to take profit from emerging markets. FIIs had done a similar exercise in the wake of the US subprime crisis, which ultimately led to a global financial meltdown. Sarkar feels that this time around, when FIIs rerate the country, they will again look at the large caps, which provide better liquidity than small caps and midcaps. He, however, feels investors, instead of looking at market cap, should follow a multi-cap strategy and focus on earnings and potential profit. 

For Indian automobiles, 2025 will go down as a dream year. Maruti Suzuki, which has a market cap of nearly Rs5 lakh crore, rose by more than 38 per cent from under Rs11,000 on 31 December 2024 to nearly Rs15,000. The bulk of the rise came in the last two-and-a-half months. Mahindra and Mahindra has also gained 20 per cent during this period. Tata Motors, which has split the company into commercial vehicles and passenger cars businesses, does not lend itself to meaningful comparison. In two-wheelers, it is a similar story, with Hero MotoCorp and TVS all making 52-week highs in the October-November period. Bajaj Auto, which did a buy-back in February, is also closer to its 52-week high. Ashok Leyland has also given a neat 40 per cent return.

Many manufacturing companies were aided by lower raw material prices prevailing for the better part of the year. Crude oil, in particular, was down. Besides lower prices, volume growth picked up thanks to the government leaving more money in the hands of consumers, leading to better profit margins. The next two quarters are expected to be even better. With analysts predicting the continuation of lower crude prices, the trend is likely to continue. In the event of a cessation of hostilities between Russia and Ukraine, there is also a possibility of crude prices coming down further, as Russian oil will also enter the global market.

Refiners’ profit up, despite steep fall in crude

The low crude prices have not, however, impacted the profits of Indian refineries. If anything, profits of Indian Oil, BPCL and HPCL have soared during the quarters, as the end prices of petrol, diesel and aviation fuel to consumers have remained virtually unchanged, despite the fall in crude prices. While the Centre did reduce its share in the price of crude, many states have failed to lower their share of excise, resulting in prices remaining totally out of sync with global prices.

Indian Oil’s profit in the first half of the current fiscal is more than the profit earned in the last financial year. So is HPCL’s. BPCL’s profit for the first half is marginally lower than the profit for the entire year. The shares of these companies have given noteworthy returns, with IOL giving returns of 28 per cent over a one-year period and 150 per cent over a three-year period. HPCL has likewise given 31 per cent and 247 per cent, while BPCL has given returns of 25 per cent and 145 per cent over the same period.

Low crude prices have impacted the Exploration and Production (E&P) companies. ONGC and Oil India have given negative returns over a one-year period. Even GAIL has given negative returns of around 2 per cent. The main challenge for ONGC is that it has not been able to make any new finds in India or overseas. Bombay High was the only large find. The failure to increase the acreage of oil has now resulted in India having to import nearly 90 per cent of its crude globally. Recently, the ministry has been looking at tapping oil from offshore regions around the Andaman and Nicobar Islands. While some traces of oil have been found in the Andamans by ONGC, Oil India has found gas in the region.

Metals on a new high

High metal prices have, however, helped companies in the steel, copper and aluminium industries during the year. Aluminium prices reached a high of $2,800 per tonne in October, nearly $600 more than they were in January. Demand from EV manufacturers and green energy producers saw demand rising, with accumulated stocks depleting. Hindalco shares touched a 52-week high of 864 in October, while NALCO also rose sharply from April. Hindalco, which is one of the largest aluminium and copper producers, has given 18 per cent returns over the last year.

What is noteworthy is the returns over the three-year period – 246 per cent, which is three times the returns given by the BSE Metal Index. Hindalco, being an integrated company with its subsidiary Novelis catering to end consumers, including beverages, packaging, automobiles, construction and producing products for the aerospace and defence sectors, is well placed to benefit.

Tata Steel, a global steel company, has given nearly 27 per cent returns year-to-date, higher than the 20 per cent recorded by the BSE Metal Index. It made a 52-week high of Rs187 towards the end of October. JSW had likewise made a 52-week high of Rs1,223 on 29 October and has also given decent returns. Jindal Stainless, despite concerns of dumping, also made a 52-week high on the same date.

FMCG underperforms

There are many companies outside the mainline indices of Sensex and Nifty which have done notably well. Indices cannot capture all growth stories. However, several companies in energy, coal, property development and construction have performed quite well. “Save for the IT sector, I am bullish on domestic consumption companies and capex-associated companies,” says Sarkar.

Choksey says companies in the FMCG sector that embrace technology and AI will continue to do well. Reliance Industries is a case in point. On the other hand, Hindustan Unilever, which is still grappling with technology, has not given any worthwhile returns. Over the last year, it has given 1.5 per cent; over 2 and 3 years, it has given -4 per cent and -1.3 per cent, respectively. Dabur has likewise given negative returns over 2 and 3 years, while the one-year return is 3.2 per cent. Britannia Industries, however, is a study in contrast, having given much better returns across all three periods.

Over the last 3 years, it has given returns of 42 per cent. ITC, which spun off its hotels division, has also given negative returns over one- and two-year periods. Tata Consumer Products, like Britannia, has given very good returns over the last one, 2 and 3 years. Godrej Consumer Products has given negative returns over the last year, and its returns over the two- and three-year periods trail those of Tata Consumer.

It may not be difficult for FMCG companies to fix their lacunae. Even smaller companies like Wagh Bakri have their own tea retail outlets. Hindustan Unilever, despite being the biggest, does not invest in building retail shops. Tea corner shops, which are ideal meeting places, can also be used to display and sell other products. Smaller companies are more tech-savvy and have more retail outlets. Secondly, there is a lot of competition from regional brands nibbling into their shares. This is seen even in snack companies. When Haldiram sought a valuation of Rs1 lakh crore, it was largely the distribution reach which attracted the private equity. Once the retail chains are built, the private sector feels it will be able to push other products through the distribution channels. However, the realisation is that having only good products will draw consumers. Platform companies with good distribution will make all the difference. Going forward, government-backed tech platforms like ONDC will be great levellers, as all producers, big or small, will be able to sell products across the country.

With the India story well on track, strategies have to be framed for the next 10 to 20 years. Corporate India will benefit from higher-income, tech-savvy consumers. Business India is of the view that equities will continue to remain the preferred asset class, which cannot be ignored by investors. Extraneous factors like geopolitics and war will sometimes dampen sentiment, but cannot derail the growth path.