Stock Market Crash: Even More Volatility In 2025? Deepak Shenoy Of CapitalMind Decodes

2025 is the year in which markets are likely to see more volatility in comparison to the last two years in which market volatility has been comparatively less, says Deepak Shenoy of CapitalMind. Shenoy expects the coming year to bring more market fluctuations, urging investors to remain prepared for turbulent times.

A Year of Market Drama
Shenoy believes that while the first half of 2024 will see market volatility, India’s economic fundamentals remain strong. He cited factors such as the new US president is going to implement new policies such as tariff adjustments and reduced government spending, which will play a crucial role in shaping market dynamics. "Markets will likely be volatile, and a lot of drama is expected," he said, adding that the market's performance in 2025 would largely be shaped by macroeconomic factors and government policies.

RBI's Rate Cut
Shenoy also pointed out that inflation in India has been moderating, suggesting that the Reserve Bank of India (RBI) could follow a rate-cut strategy to support growth. "Inflation has moderated, and if it continues to fall by 25 basis points, the RBI will likely consider a rate cut," Shenoy noted. He added that dissent within the RBI had already led to discussions on rate cuts, and with two members advocating for the move, the central bank might act soon.

Key Sectors to Watch
Looking at India’s growth potential, Shenoy highlighted several sectors that could see significant benefits from government policies and ongoing economic trends. "The focus of the upcoming budget will likely continue the policies of the past, with an emphasis on boosting domestic manufacturers, including companies in the semiconductor space, and infrastructure—especially railways and defense," Shenoy said. He also pointed to opportunities in domestic consumption, quick commerce, and financial infrastructure, with the healthcare sector also presenting growth prospects due to under-covered hospitals.

Mid-Caps and Small-Caps Shine in 2024
2024 has been a strong year for mid-cap and small-cap stocks, as well as the asset management industry. However, Shenoy noted that foreign institutional investors (FIIs) have faced challenges, with many pulling out of the market. "FII investors have not done well; they've exited," he observed, although he acknowledged that JP Morgan's inclusion in indices has brought in more investors.

Investment Strategy: SIPs for Long-Term Gains
Looking ahead, Shenoy advised passive investors to stick with their Systematic Investment Plans (SIPs). "For passive investors, the strategy remains simple—keep doing SIPs. Times may change, but long-term investors should remain focused on their goals," he emphasised. Despite expected market fluctuations, Shenoy believes that volatility can be advantageous for long-term investors who do not panic during short-term market swings.