India’s stock market downturn is unfolding as expected, with further risks looming, according to Bank of America (BofA). The firm projects single-digit returns for the Nifty 50 in 2025 and negative returns for small- and mid-cap stocks, citing slowing economic and earnings growth.
Key Market Trends and BofA Projections
1. Market Correction & Sectoral Declines
The market peaked in September 2024 and has declined since, aligning with BofA’s August 2024 bearish outlook.
Steep corrections have been observed in:
State-owned enterprises: -26%
Low-float stocks: -24%
Momentum-driven stocks: -25% to -34%
Mid- and small-cap stocks have fallen 18% and 21%, respectively, compared to a 13% decline in the Nifty 50.
2. Earnings Growth Concerns
Nifty EPS growth is projected at 12% for FY26, lower than the consensus forecast of 15%.
Key factors contributing to the earnings shortfall (80% impact):
Slower capital expenditure growth
Weaker credit growth
Declining commodity prices
3. Capital Expenditure Moderation
Capex growth averaged 20% in the past three years but is now expected to slow to 13% in FY25-27.
In FY25, capex growth could drop to just 9% as the government balances investment with consumption.
4. Global & U.S. Risks Impacting Indian Markets
U.S. policy uncertainty (trade, fiscal, and monetary policies) could increase volatility.
Services exports to the U.S. are a potential risk area despite India’s limited direct trade exposure.
Foreign Institutional Investor (FII) flows may remain weak due to:
High U.S. bond yields
Rupee depreciation risks
Delayed Federal Reserve rate cuts
Strong U.S. equities outperforming emerging markets
Investor Takeaways: Monitoring Market Sentiment & Earnings
For investors tracking market trends, these APIs offer valuable insights:
Market Most Active API – To track the most actively traded stocks in the Indian market.
Financial Growth API – To analyze earnings growth trends across Indian stocks.
Final Thoughts
While India’s structural growth story remains intact, short-term volatility and earnings risks persist. Investors should closely watch corporate earnings, capex trends, and FII flows, along with global macroeconomic shifts that may affect sentiment toward Indian equities.
