Will the Indian market deliver double-digit returns in Samvat 2081?

As Samvat 2081 approaches, market enthusiasts are reflecting on a remarkable year for Indian equity markets. Between Diwali 2023 and mid-October 2024, the Nifty50 and Sensex delivered impressive returns of over 25 per cent, respectively, outpacing many global indices. 

With benchmarks touching new highs — Sensex surpassing 85,000 and Nifty50 crossing the 26,000 mark — the past year has been a period of highs and lows, excitement, and uncertainties. As we look ahead to Samvat 2081, investors are questioning whether the upcoming year will sustain the bullish trend or lead to a period of consolidation.

A Year of Volatility and Resilience

Samvat 2080 was marked by significant events that shaped market movements. The year saw the presentation of both the interim and final Union Budgets for FY2024-25, India’s general elections, inflationary pressures in developed economies, and rising geopolitical conflicts. Despite these challenges, Indian markets stood out globally, showing remarkable resilience.

Geopolitical tensions weighed heavily on markets, leading to heightened anxiety and sharp fluctuations. Inflation, particularly in developed economies like the U.S. and Europe, caused further volatility. However, in the latter half of the year, signs of stability emerged from economies like the U.S. and Japan, where inflation showed signs of moderation and growth began to pick up. Throughout this period, the Indian economy remained strong, showcasing its resilience amid global turmoil.

Will Nifty Give double-digit returns this year? Here's what experts say:

According to Shrikant Chouhan, Head of Equity Research at Kotak Securities, Indian markets could see steady growth in the coming year, though not at the same pace as in Samvat 2080. Chouhan expects Nifty50 net profits to grow by 6.7 per cent in FY25, with a projected earnings per share (EPS) of ₹1,042. For FY26, net profit growth is forecasted at 17.3 per cent, with an EPS of ₹1,222.

At current levels, Nifty is trading at 23.7x its estimated earnings for FY25 and 20.2x for FY26. Chouhan expects broader market growth across various sectors in FY25. "Based on the earnings growth, macroeconomic conditions, and current valuations, Nifty could deliver low double-digit or high single-digit returns in Samvat 2081," he said. While the growth may not match the previous year’s stellar performance, there is still potential for positive returns.

Meanwhile, Trivesh D, COO of Tradejini, holds a more cautious outlook for Samvat 2081, suggesting that double-digit returns from the Nifty might be difficult to achieve. "Markets are currently expensive, and a correction seems likely," he remarked. According to Trivesh, while retail investors have kept markets afloat, broader market valuations appear stretched. Slowing earnings growth, along with external factors like China’s economic stimulus and potential U.S. policy shifts, are driving foreign investors toward other opportunities.

"We expect Nifty to move sideways or even downwards over the next year. The chances of a significant upward movement seem slim," Trivesh added. This sentiment suggests that the Indian market may enter a phase of consolidation or mild correction, especially given the high valuations and external headwinds.

Furthermore, brokerage SBI Securities offers a more nuanced view of Samvat 2081, predicting a year of consolidation followed by a potential uptrend. "Nifty50, Nifty Next 50, Nifty Midcap, Nifty Smallcap, and NSE 500 have delivered compounded returns of 28 per cent, 31 per cent, 43 per cent, 44 per cent, and 32 per cent, respectively during FY20-FY24," SBI Securities noted.

The brokerage believes that Samvat 2081 may start with a phase of consolidation, especially in the first few months, as markets digest key events like the U.S. elections, global trade policies, and ongoing geopolitical tensions. In the short term, markets are expected to remain choppy due to these uncertainties. However, SBI Securities expects a potential uptrend after the presentation of the Union Budget for FY2025-26 in February 2025, which could provide fresh triggers for growth.

Factors to Watch in Samvat 2081

Several factors will shape the performance of Indian equity markets in Samvat 2081. The U.S. elections in November 2024 could have a significant impact on global markets, influencing trade policies and investor sentiment. Additionally, monetary policy decisions by the Federal Reserve and the RBI will be closely watched. With inflationary pressures still a concern, any changes in interest rates or liquidity conditions could drive market volatility. Corporate earnings growth will also be a key factor.

Finally, geopolitical risks will continue to weigh on global markets. Ongoing tensions in Eastern Europe, the Middle East, and Asia could lead to further volatility, making it crucial for investors to remain vigilant.

As Samvat 2081 approaches, the outlook for Indian equity markets remains mixed. While the Nifty50 and Sensex delivered stellar returns in Samvat 2080, the coming year may see more moderate gains. With valuations stretched and external risks looming, experts suggest that a period of consolidation may be on the horizon.

However, growth opportunities remain, particularly in the latter half of the year, when macroeconomic stability and corporate earnings recovery could drive markets higher. Investors should remain cautious but optimistic, keeping an eye on key triggers like the U.S. elections, RBI policy decisions, and the Union Budget for FY2025-26. As always, a diversified portfolio and a long-term perspective will be key to navigating the uncertainties of Samvat 2081.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.