Indian stock market predicted to remain range bound

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, predicts that the Indian stock market is unlikely to reach new highs this year. He estimates that the Nifty index will settle at around 23,500 by the end of 2025. According to Sheth, the market is expected to fluctuate within a range between 21,281 and 26,277. Sheth noted that the market has recently experienced a correction of over 15%. He believes that while valuations are starting to return to average levels, it will take a considerable amount of time for the market to recover from these losses. He cautions investors to adopt a balanced approach and diversify their portfolios to minimize risks. Regarding mid-cap and small-cap stocks, Sheth advises caution. He mentioned that their valuations remain high, meaning these stocks could face further corrections. He believes that until earnings improve, these categories of stocks should be avoided. The Nifty IT index has dropped by more than 16% in early 2025 due to fears of a U.S. recession, reduced client spending, and competition from artificial intelligence. Sheth sees potential for recovery in the IT sector if macroeconomic conditions stabilize and client spending increases. The recent issues surrounding IndusInd Bank have raised concerns about corporate governance in the banking sector. Sheth expects that stricter regulations by the Reserve Bank of India may enhance transparency and ultimately boost investor confidence, helping the sector to regain momentum. As for initial public offerings (IPOs), Sheth argues that they perform best in rising markets. He suggests that retail investors wait before investing in IPOs, as many companies do not have proven track records. In an uncertain market, Sheth recommends focusing on the return of investment rather than simply chasing high returns. He suggests diversifying into non-correlated asset classes such as gold, which he sees as a safe choice in volatile conditions. He also acknowledges the potential of real estate but notes its illiquidity. Sheth highlights that foreign portfolio investors (FPIs) will return to India once they find the valuations attractive compared to other markets. He warns new investors to avoid assuming that current trends will continue indefinitely, emphasizing the importance of recognizing market cycles.