By bigbreakingwire 
The correction in the market is unfolding as expected, and CY25 is anticipated to remain a weak year for the markets.
Earnings are likely to continue declining, with the overall sentiment pointing towards subdued performance for the year.
BOFA projects single-digit returns for the Nifty in CY25, suggesting a more modest outlook for major indices.
Capital expenditure (Capex) growth is expected to slow down, with a forecasted 13% compound annual growth rate (CAGR) for FY25-27, compared to the 20% CAGR witnessed in the past three years.
Foreign institutional investor (FII) flows might remain weak due to strong U.S. bond yields, which could divert capital away from Indian markets.
Market valuations are on the higher side, particularly for mid-cap and small-cap stocks, which are expected to experience continued contraction in valuations.
Bank of America predicts that capital expenditure (capex) growth will slow down from a strong 20% annual growth rate over the past three years to around 13% annually from FY25-27. This slowdown is due to the government’s shift towards balancing spending on capital projects and consumption, which could negatively affect overall economic growth.
Foreign institutional investor (FII) flows are expected to remain weak, contrary to earlier hopes of a recovery. This is because of factors like high US bond yields, the possibility of the rupee losing value, delayed interest rate cuts by the Federal Reserve, and strong performance of US stocks. Additionally, domestic institutional investor flows are also at risk, as they have decreased since reaching their peak in October 2024.
Kotak Institutional Equities Warns of Directionless Market Ahead, Cautions on Overvalued Small and Mid-Cap Stocks
Kotak Institutional Equities has warned that the Indian stock market will likely remain uncertain in the coming months. Even though the market recently saw a sharp drop, overall returns have been flat over the past year. Kotak believes the market is still adjusting to the strong gains of previous years. The firm is especially concerned about small-cap and mid-cap stocks, which are still overvalued. It also highlighted the risks of lower earnings, higher global interest rates, and reduced interest in emerging markets, which could all weigh on the market.
Looking ahead, Kotak expects different segments of the market to perform differently. Large-cap stocks might stay in a narrow range, while smaller and more speculative stocks could face bigger drops. The firm also thinks that analysts and investors will start revising their stock valuations and earnings predictions, after relying on overly optimistic methods in recent months. This could lead to a shift in the market, especially in mid-cap and small-cap stocks, where prices had drifted away from their true value. Overall, Kotak expects a quieter and more challenging market in the near future.
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