It appears 2025 will be a tough year for the market: Samco's Jimeet Modi

Modi tells that FPIs are expected to stay away from Indian markets until expensive Indian equities become attractive to them

Foreign portfolio investors (FPIs) have mostly remained on the sidelines in recent months amid market correction. JIMEET MODI, founder and chief executive officer at Samco Group, tells Puneet Wadhwa in an email interview that FPIs are expected to stay away from Indian markets until expensive Indian equities become attractive to them. Edited excerpts:

 

Have retail investors lost faith in the ‘India equity story’? Dematerialised (demat) additions have slowed in the past few months. 

Most demat account additions happened after the pandemic. Many retail investors are new to this level of volatility and decline. Until now, they have followed the buy-the-dip strategy. Since their entry into the market three to four years ago, they haven’t encountered a major correction.

 

It would be far-fetched to say retail investors have lost faith in the ‘India equity story’. It may take some time for the tide to turn. In the current market scenario, retail investors need expert guidance to navigate volatility and emerge winners from this phase.

 

That said, FPIs are expected to stay away from Indian markets until expensive Indian equities become attractive to them.

 

Any pitfalls investors should watch out for? 

The biggest headwind investors should watch out for is US inflation. If inflation exceeds permissible limits, it will be a major negative for stock markets and investors globally. If inflation marches northwards, the US Federal Reserve will have to either maintain interest rates at current levels or hike them to fight inflation. Both scenarios are unfavourable for equity markets.

 

In addition, fiscal policies worldwide are beginning to clash, with tariff wars emerging. In this environment, central banks’ only available tool to tame inflation is monetary policy.

 

How are you Trump-proofing your investment strategy and advising your clients? 

The only way to have a Trump-proof portfolio is through diversification, including some exposure to gold and assets not linked to equities. Gold has a limited correlation with equities and serves as an excellent hedge against inflation.

 

If Trump’s tariff policies materialise — as he has indicated — they will cause a major inflation spike in the US, posing a threat to investment portfolios.

 

When do you expect earnings growth to pick up? 

Earnings are likely to remain subdued until the first quarter (Q1) of 2025-26 (FY26). However, with the onset and progress of the monsoon in the second quarter of FY26, we may see some pressure easing on earnings growth.

 

Potential triggers beyond this include the economy’s performance in Q1FY26 and government spending during the period. The effects of personal income-tax rate cuts will start kicking in by the end of Q1, acting as another growth catalyst. These triggers will determine the direction of corporate earnings growth and play a key role in its restart.

 

To what extent are you using artificial intelligence (AI) in your day-to-day work of stock picking and advisory? 

We are in the exploratory stage of using AI for stock picking and recommendations. Some regulatory clarity is emerging on AI’s role in stock trading. However, we also need to ensure there is no downside risk for our clients.

 

How do you see the fortunes of the broking and wealth management industry playing out in 2025? 

The fate of the broking and wealth management industry is directly tied to the state of the secondary market. Indian markets have been in a downtrend since peaking in September last year.

 

The phased regulatory tightening of the futures and options market, which began in November 2024, along with other factors creating market volatility, triggered a snowball effect on trading volumes. Geopolitical tensions have exacerbated the situation. So far, all these have acted as major headwinds.

 

It appears 2025 will be a tough year for the market, as the majority of traders are struggling to make money.

 

Will 2025 be a tepid year for primary markets as well? 

The primary market’s fate is closely linked to the secondary market, much like a placenta. With markets expected to remain subdued in 2025, the Nifty is likely to trade within a broader range of 21,281-26,277.

 

In this backdrop, the freedom to price initial public offerings frivolously will be curbed to a greater extent. Given the volatility and the current downtrend in the secondary market, the primary market is also likely to slow down.