Will January be tough a month for equity investors again? Here’s what the data shows

January, a month historically associated with caution among equity investors due to frequent negative returns, could see further caution amid a series of key events. On January 20, Donald Trump will be sworn in as the US president, and this is likely to influence global market sentiment.

Following this, market dynamics could be shaped by the US Federal Reserve’s potential delay in aggressive rate cuts and the upcoming domestic Union Budget on February 1. Historical data reveals that the NSE Nifty 50 index has declined on 13 out of the past 20 occasions in January. The index has witnessed six consecutive falls in January since 2019. So, what to expect from markets now? Analysts on Dalal Street are looking cautious for the near-term considering a slew of events.

Jathin Kaithavalappil, Assistant Vice President, Choice Broking, said, “Domestic equity markets are expected to be cautious in Q1FY2025. The domestic Union Budget: fiscal measures to be released for the year on February 1, 2025 and the unemployment reports out of the US as they almost always signal winds of changing trends in the inflation in the USA. Finally, creeping inflation in our country in different areas will certainly be one of the issues.”

G Chokkalingam, Founder, Equinomics Research believes that the first half of 2025 to remain weak for Indian equity markets. “Weak rupee, possible delay in aggressive rate cut by US Fed and forthcoming Budget would delay return of FIIs investments in Indian equity,” said. Foreign institutional investors poured just Rs 3,459 crore in equities in 2024 till December 26. Meanwhile, global investors offloaded more than Rs 1.15 lakh crore shares in October and November. Earlier, they bought shares worth Rs 1.71 lakh crore in 2023.

Overall, the year 2024 continued to remain in favour of bulls despite heavy outflows by foreign institutional investors in the last quarter of the calendar year. The NSE Nifty50 gained nearly 10% year-to-date till December 27, 2024. On the other hand, the Nifty Midcap 150 and Nifty Smallcap 250 indices advanced 23% and 26%, respectively, during the same period.

Sharing his views on the New Year, Ajay Garg, Director and CEO, SMC Global Securities said, “Nifty 50 is expected to cross the 28,000 mark in 2025 but the growth may remain non-linear. The current market downturn in turn poses a good opportunity to pick some high-quality stocks at a lower price. Taking the “buy low sell high” approach can provide fruitful returns in 2025.”

Garg further added that sectors such as BFSI, FMCG and infrastructure can deliver superlative returns in 2025.

While many sectors have witnessed laggard earnings in July-September 2024, the BFSI sector total income rose by 16% on a year-on-year basis while the infrastructure and engineering sector saw a surge of 12.9% YoY in total income in the July-September 2024 quarter.

“BFSI will experience sharp growth in 2025 with improved asset quality, growth in loans, higher investment participation, and higher financial literacy. The FMCG sector was deeply hurt by lower consumer demand in 2024.

However, it is one of the stable sectors that can revive in the next year with rising consumption, quick commerce push, and higher premiumisation. The infrastructure sector can also deliver great returns next year on the back of higher spending from the government, a better supply chain network in logistics, housing development, and public-private partnerships,” Garg said.