Indian Stock Market Outlook: What Happened And Way Forward

India’s Nifty 50 index has corrected around 15% from its peak in September 2024 and has been underperforming its global peers so far in 2025. The markets have been on a losing streak for five straight months.

In calendar 2024 liquidity was on forefront driving Indian equity markets. This was well supported by sound macros & robust growth till September, 2024. However, our last RBI Governor, Mr. Shaktikanta Das in his last policy speech reduced India’s GDP growth rate to 6.4%. Global capital started shifting towards China and foreign institutions started selling Indian equities.

The Indian economy stands at a crucial juncture in 2025. Despite global issues like geopolitical tensions, regional economic divergences, India remains as the fastest growing major economy. However, as the pace of growth has slowed down, a shift is needed in the investment philosophy. From growth-oriented investment approach, one needs to shift the focus to value investing approach.

Multilateral agencies have predicted the economic growth of 6.4% to 6.9% in the financial year 2026. However, the beginning of calendar 2025 has witnessed sharper growth deceleration driven by weak industrial activity, muted government spending and slow recovery in private corporate spending. The government has reduced individual taxation rates to boost personal consumption. For the industrial growth, rising input cost pressures persist while the uncertainty on account of US tariffs is likely to continue till April, which can impact our exports going forward.

Despite all the chaos, India remains to be an attractive investment destination. This market correction would offer a lot of good investment opportunities at reasonable valuation. However, investors need to keep their own risk assessment mechanisms at forefront and focus on value investing. Preference to be given to investments in high dividend yield companies with strong cash flows and reasonable valuations.

Needless to say, the management quality always matters. Markets have corrected over ~15%, from the top, offering opportunity for investors to invest into good companies with reasonable valuations. Choosing large-cap stocks with strong financials and reliable earnings growth can be a smart move for disciplined investors. However, one must remember, equity investment always comes at high risk, and to offset this risk you should have a long term investment horizon when investing into equities.