Sensex, Nifty & 2025 returns: What's in it for stock investors after a modest 2024?

2024 was a tale of two halves where the benchmark stock indices Sensex and Nifty made strong gains in the first half, only to trim them by the year end, thanks to steep earnings downgrades at home, concerns over rising dollar and 10-year US bond yields and a likely fewer Fed rate cuts due to US-China trade war in the Trump 2.0 era. This is even as midcap and smallcap stocks kept rising despite valuation concerns.    

2025 could bring own challenges. It is better for investors to keep expectations of low from the stock market in 2025, in single digits, said analysts at BT Markets survey.  

2025 could be a year of modest returns and geo-political issues, along with the US Fed moves, would be critical in determining the direction of the market, said Surjitt Singh Arora, Portfolio Manager - PMS at PGIM India AMC.  Arora believes investor expectations need to be toned down, as earnings in the first six months of 2025 could be muted, given the tepid demand environment.  

Ajit Mishra - SVP, Research at Religare Broking said Nifty may reach 26,000 by 2025-end, reflecting expectations of low single-digit returns and economic stability in India.

"Currently, the markets are experiencing high volatility, driven by significant global events such as the change in the US government, geopolitical tensions, and anticipated Fed rate cuts, he said.

Shruti Jain, Chief Strategy Officer at Arihant Capital Markets said higher valuations and slowing earnings, could lead to a range-bound market for the first three months of 2025, with a recovery driven by underlying earnings growth expected later.

"Given India’s strong structural growth, we believe the Indian economy and markets will continue to perform well, despite some headwinds," she said.

Jathin Kaithavalappil, Assistant Vice President at Choice Broking sees Sensex to hit 90,000, while he sees Nifty at 28,000 by 2025 end. This analyst is betting on strong earnings growth, macroeconomic stability, and structural reforms. India is mostly driven by an ongoing domestic consumption and investment cycle, which would intensify the economic growth process, even as global liquidity conditions could turn supportive with interest rate cuts, Kaithavalappil insisted.

Saurabh Jain, Managing Director & Head, Wealth Solutions at Standard Chartered Bank said he expects equities to beat bonds and cash in 2025. This is even as elevated valuations -- 12-month forward PE at 20 times for Nifty index) are likely to limit multiple expansion.

"We believe earnings growth (Bloomberg estimate at 14 per cent YoY for FY2026) would drive total returns, supporting the outperformance of equities to bonds and cash," Jain said.