The Nifty index could reach 25,000 by December 2025, driven by a revival in consumer spending, improved employment trends, and easing foreign investor selling, according to a new report released on Tuesday. Emkay Institutional Equities projects that the Indian stock market will remain volatile in the near term but expects a recovery in the second half of 2025.
The research firm predicts increased market fluctuations in the first quarter of 2025 due to weak demand and global uncertainties. However, a pickup in retail lending, better liquidity conditions, and government welfare spending are expected to support economic recovery and boost market sentiment from the second half of the year.
“Markets tend to overreact and overextend on both the upside and the downside,” said Nirav Sheth from Emkay Global Financial Services. He added that the current volatile bottoming process is typical.
“We estimate that the worst of the earnings downgrade cycle is behind us and expect a recovery in the second half of the fiscal, triggered by renewed government spending and tax relief-led consumption spend. It is time to buy,” Sheth noted.
On a sectoral level, Emkay Institutional Equities maintains an overweight stance on discretionary consumption, real estate, and healthcare but remains cautious about financials, consumer staples, and materials due to valuation concerns and structural challenges.
The firm also noted that foreign portfolio investor (FPI) selling, a major concern for the market, is likely to subside by the second quarter of 2025. The weakening of the US Dollar Index (DXY) could help stabilize the Indian rupee, further supporting market recovery.
Corporate earnings are expected to improve, with mid-teens growth projected for FY26, primarily driven by financials, metals, and energy stocks. Emkay also pointed out that capex growth, which saw a strong 31% CAGR between FY21-24, could slow to 10-13% due to election-related spending constraints. However, a rebound is expected in FY26 as policy clarity returns.
Despite short-term volatility, the report is optimistic about the Indian stock market’s long-term potential.
