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Investing.com -- Indian equities are expected to perform well in the second quarter of 2025, driven by stronger growth data, a more dovish Reserve Bank of India (NSE:BOI), and potential earnings surprises.
India’s sluggish growth over the past two quarters has been a key reason for recent stock sell-offs. But upcoming earnings data could surprise the sell side and provide a key catalyst.
Factors such as rising government spending and improved rural terms of trade are expected to lift growth, while a likely rate cut by the RBI in April could further support sentiment.
While India’s correlation with global markets has declined, the country cannot completely decouple from global trends. A sharp rise in oil prices or a slowdown in global growth remains a risk.
“Softer global markets could cap absolute returns, whereas a global bull market could coincide with relative underperformance for a low-beta market like India,” analyst at Morgan Stanley (NYSE:MS) said.
A sharp rise in oil prices or a slowdown in global growth remains a risk to India’s bullish outlook.
The RBI is expected to implement a shallow easing cycle, with a total of 75 basis points in rate cuts, including one already delivered in February and another likely in April.
Additionally, the RBI’s focus on ensuring durable liquidity and easing regulatory burdens on banks should boost credit growth
Foreign investor positioning in Indian equities remains at all-time lows, but Morgan Stanley sees room for increased buying ahead.
“With foreign portfolio positioning at all-time lows, we think foreign investors may start buying stocks in earnest,” Morgan Stanley added. Despite possible short-term risks, Morgan Stanley maintains a bullish stance on Indian equities in 2025.