The first half of 2025 was extremely challenging for the investors. While the overall market appears to have come closer to an all-time high, investors’ portfolios are far from reaching an all-time high.
The first two months of the market saw a substantial decline due to geopolitical tensions and the tariff war. However, the market later improved, albeit in a patchy manner. Overall, Nifty reported a gain of 7.90 per cent in the first half. But the key question is, what do we expect in the second half of 2025?
If you recollect, we had given our prediction for 2025, and hence it’s good to revisit and see whether we need to revise our prediction for the rest of the year.
Let me start with the Nifty50.
I predicted that 2025 would be another year of positive gains. That theory comes under severe scrutiny as the market tanked in the first two months. But in the first half, it was by almost 8 per cent. We predicted that the Nifty 50 would yield gains of 10-20 per cent in 2025 with a 55 per cent probability. We are not changing our outlook, as we believe that geopolitical tensions should ease and may not be as severe as in the first half. Also lower rate of interest augurs well for the equity market.
Mid and small caps
While the Nifty50 can extend its gains, we are unsure about the mid and small caps. In the first half of 2025, mid- and small-cap stocks are almost at the same level as at the end of 2024. We predicted that mid- and small-cap stocks would yield muted returns. We continue to believe that the second half will be similar to the first half. Yes, there may be a few companies that outperform, but overall, we don’t expect the indices to yield any meaningful returns.
FPIs inflow
In the first half of 2025, FPIs sold Rs 78000 crore. However, we predicted that FPIs would most likely invest anywhere between Rs 50,000-100,000 crore. We strongly believe that India’s strong economy growth despite headwinds, lower crude oil prices, stable rupee and 100 bps rate cuts should see FPIs coming back strongly in the second half. If our prediction to hold true then FPIs should invest anywhere between Rs 1.30 lac crore to 1.80 lac crore in the second half of 2025. That means we are expecting on an average Rs 25000 crores of net inflow from the FPIs.
Gold and Silver
Gold and Silver both had a fantastic rally in the first half. Gold moved up by 26 per cent and silver moved up by 25 per cent. Both have an overshoot over the full-year prediction despite being bullish on gold and silver. Considering the significant surge in gold prices, we anticipate muted gains in the second half. Meanwhile, we believe the rally in silver may continue, as demand from the industrial sector is likely to remain strong for silver.
Crude Oil
Despite the heightened geopolitical situation, crude oil prices have remained on a downward trajectory. The Indian basket of crude oil prices in the first half of 2025 was $72 per barrel. We are not expecting any further decline in the crude oil prices as we believe that a further fall in prices can reduce supply due to viability, pushing prices back up. We had predicted that crude oil prices would remain between $70-80 per barrel. Now we see a greater probability of closer to $70 per barrel compared to $80 per barrel, mainly due to the slowing global economy.
Sectors that should shine in the second half
There is no change in our sector view as we predicted at the beginning of 2025. We continue to like Finance, capital goods/Infra and FMCG. While Finance and Capital goods/infra did well but FMCG has been a laggard. However, we strongly believe that it should bounce back mainly due to urban demand returning with tax exemptions and lower interest rates, and secondly, due to good monsoons for the second consecutive year. Additionally, raw material prices are stable, allowing them to increase volumes. Their valuations are also below the historic averages.
But…
Our prediction has the biggest hurdle in the form of Trump. Still, there is little clarity on what will happen on 9th July. We expect one more extension or rollout of tariffs, partially or fully. Tariff uncertainty is making decision-making longer, as no one wants to commit any capex that may turn out to be lowering ROE due to the tariff. This uncertainty is delaying decision-making.
More tailwinds than headwinds
Despite tariff uncertainty, we are expecting more tailwinds for the Indian stock market compared to headwinds. The reason for this is due to likely good monsoon, 100 bps rate cuts, Rs 1 lac crore tax bonanza in the budget, stable rupee, lower crude oil prices and inflation within RBI range. All these factors create a long list of tailwinds for the Indian stock market.
Hence, if you can control your emotions, there is a high probability that you will make more in the second half compared to the first half.
Enjoy the second half of 2025. The best is yet to come