India a boring market in 2025; Nifty to rise 15% on earnings: Mark Matthews

Mark Matthews says that India is the only essential emerging market for global portfolios. India's two big strengths, he believes, are its demographics and 'Jugaad' - the 'can-do' spirit

With Indian markets yet to hit new highs in 2025, Mark Matthews, managing director and head of research for Asia at Julius Baer, tells Puneet Wadhwa in a fireside chat that India is the only essential emerging market for global portfolios. India’s two big strengths, he believes, are its demographics and 'Jugaad' – the ‘can-do’ spirit. Edited excerpts:

 

How do you assess the year 2025 for global financial markets, excluding India?

 

In one word, surprising. Truth be told, if you had asked me in January 2025 how global markets would perform this year, I would have said there was over a 50 per cent chance they would be down. Yet here we are, with the bellwether equity index, the S&P 500, up 17 per cent, much better than the long-term average. It has been a surprising year. What’s even more incredible is that emerging markets (EM) as a whole are up over 30 per cent. So yes, it’s been a really surprising year, and that makes me somewhat uncomfortable forecasting the next one.

 

 

The US markets have made consistent highs throughout 2025, whereas the Indian markets have done so just once at the benchmark level. Would you say the Indian markets have decoupled from the US?

 

No. The Nifty is up about 6 to 7 per cent in US dollar terms. That’s a perfectly good return — annualised, it's around 11 to 12 per cent. So, it’s not that India has gone down, but it has underperformed the US and its emerging market peers. There are two main reasons for this. First, China. A year ago, Indian fund managers feared that China would become investable again, and it has. Second, corporate earnings in India have disappointed, but are nearing an inflection point. With goods and services tax (GST) cuts kicking in late September, along with monetary easing, income tax cuts, and a favourable base, fiscal year 2027 could see double-digit earnings growth. In the September quarter results, the number of misses are half what it was in the previous two quarters. Nearly 20 per cent of the companies that reported results have missed, as compared to about 40 per cent for the previous two quarters.

 

Were Indian markets boring in 2025 as risk reward seemed favourable elsewhere; disappointing in terms of returns; or challenging in terms of lack of investment opportunities?

 

I would describe India as a rather boring market this year. To be honest, I’ve been catching up on developments in China, which has made a big comeback. China’s progress across several high-technology sectors has been remarkable.

 

Is the US market nearing a bubble, especially given the performance of the 'Magnificent 7' technology stocks?

 

You could define a bubble either by valuations or by technicals. Surprisingly, by neither measure is the US market in a bubble yet.

 

The Nasdaq-100 has not deviated significantly from its long-term trend, unlike the dot-com bubble of 1998–1999, which was about three standard deviations above the average. Currently, it’s less than one standard deviation above trend.

 

As for valuations, the forward price-earnings (PE) ratio of the Magnificent 7 is about 33 times for the next 12 months and around 23 times for the next 24 months. In contrast, during the 1990s bubble, major tech stocks were trading at about 50 times PE. So, the US market is not yet in bubble territory.

 

Is the lack of AI investment by Indian IT companies a concern?

 

No, quite the contrary. The danger lies in the scale of artificial intelligence (AI) spending by hyperscalers. This year alone, the big five are investing $375 billion, and over the next three years, about $1.1 trillion, more than the size of the German stock market.

 

The risk is that these companies may not earn adequate returns. AI will benefit the broader economy through productivity and efficiency gains, but the companies making massive upfront investments bear the real risk.

 

What returns do you expect from Indian equities over the next year?

 

Over the long-term, I believe small and mid-caps will outperform simply because they have more room to grow. For the next 12 months, I expect returns of around 15 per cent, driven by expected earnings growth of about 16-18 per cent for the Nifty in fiscal year 2027. The market isn’t expensive relative to peers, and as earnings momentum picks up, there is room for re-rating.

 

What could drive Indian markets over the next three to five years?

 

India’s two big strengths are its demographics and its 'Jugaad' – the ‘can-do’ spirit. India has more people entering the prime earning age (30–60 years) than any other country, and this advantage should last until around 2060. The second factor, Jugaad, reflects India’s positive, problem-solving attitude, which is often lacking elsewhere.

 

What’s your view on gold and silver?

 

Gold, historically, has returned about 5 per cent per year in dollars and serves as a hedge against inflation. Recent price increases are not unusual, they’re partly due to geopolitical tensions and the confiscation of Russian assets, which has undermined trust in Western financial systems.

 

I expect gold to correct modestly to around $3,500 per ounce before rising to $4,500 within a year. Some optimistic projections even see it reaching $6,600 eventually, and yes, I think that’s possible.

 

For investors looking to enter India now, is this the right time, or should they look elsewhere?

 

India is fairly priced. Earnings growth looks solid for next year. India is the only essential emerging market for global portfolios — you don’t need Brazil, Indonesia, or Turkey, but you do need India, which has consistently delivered strong returns and should continue to do so.