Market Outlook
| June 30, 2025 | 1 Month |
1 Year |
|
| Rupees per Dollar | 85.75 | 85.58 | 83.39 |
| Oil (dollars per barrel) | 67.61 | 63.90 | 86.41 |
| Retail inflation (CPI) | 2.82% (May) | 3.16% | 4.80% |
- The US Federal Reserve (Fed) kept the policy rate unchanged at 4.25-4.50% for fourth consecutive policy meeting, as was widely expected. Fed revised down its growth forecast for 2025 and raised its inflation forecasts. Fed remained cautious on the future path of inflation given tariff risks
- RBI surprised the markets with a 50-bps cut in the repo rate from 6.00% to 5.50% and also reduced the Cash Reserve Ratio (CRR) by 100 bps from 4.00% to 3.00% in four equal tranches of 25 bps each from September to November 2025. RBI changed its stance from ‘accommodative’ to ‘neutral’ and stated that there is very limited space for further monetary policy easing
- We remain ‘neutral’ on the outlook for bond markets. With RBI front loading the rate cuts and providing ample liquidity in the banking system, we expect the RBI to stay on an extended pause. We believe that RBI may ease further only if the growth or inflation surprises sharply lower against the projections. The CRR cut is estimated to infuse ~ ₹ 2.5 trillion of durable liquidity into the system and is a positive step for medium-term liquidity conditions. We expect the 10-year G-sec yield to trade in a range of 6.25%-6.35% in the near term
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | 3.1 | 6.3 | 17.4 |
| BSE100 | 3.2 | 5.4 | 18.7 |
| NIFTY500 | 3.6 | 4.7 | 20.8 |
| NIFTY Midcap100 | 4.0 | 7.2 | 31.2 |
At June 30, 2025
Nifty was up 3.1 % for the month of June 2025
- Markets continued to rally in June with broad based participation across market cap spectrum
- Within BSE 100 index, amongst sectors Telecom/Retail outperformed while Consumer/EPC underperformed the broader market
Our outlook remains neutral in the short term while it remains positive in the medium term
- Uncertainty related to US tariffs, evolving global geopolitical situation are likely to keep markets volatile in short term
- Global growth and inflation challenges could act as headwinds for markets
- Earnings growth was muted in Q4FY2025 though in-line with expectations
- However, flows in the market remain steady which has been one of the key drivers for market returns
- The Nifty’s P/E, at 22x for FY2026E, is above its 5-year average
In the medium term, we expect certain important drivers for growth:
- Domestic policy pivot has shifted in favour of ‘growth’ (CRR cut, rate cut, liquidity infusion, lower risk weights and tax cuts)
- India benefits from structural levers in the form of demographic benefits, rising formalisation, manufacturing focus and digitisation
- Corporate balance sheets remain strong which positions them well for next leg of growth
- Earnings trajectory will be key monitorable over medium term
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 10%
COMP/DOC/Jul/2025/47/0670
