Rate cuts, valuations, and stock picks: Krishna Sanghavi on market trends for 2025

Krishna Sanghavi, CIO of Equities at Mahindra Manulife Investment Management, expects the Reserve Bank of India (RBI) to cut interest rates in the calendar year 2025, though the timing remains uncertain.

He highlighted the importance of global linkages, noting that rate cuts in India will depend partly on international monetary policy trends.

Sanghavi noted that inflation data and monetary policy updates arriving at frequent intervals make it challenging to predict the exact timing of rate cuts.

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However, he believes directionally, the economy could receive some monetary support next year.

Discussing valuations, Sanghavi linked the post-COVID surge in equity market valuations to the era of low interest rates and high liquidity.

He noted that high valuations have been supported by abundant liquidity, but the impact of shifting global monetary policies continues to influence market dynamics.

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While large-cap stocks currently appear attractive from a valuation perspective, Sanghavi flagged foreign portfolio investor (FPI) outflows as a concern, contrasting with the steady inflows into mid-cap and small-cap segments.

"We've seen quite a few divergences across sectors. In some sectors, there are a couple of companies doing exceedingly well, some doing weaker. So that's little bit challenging to call out sectors, but clearly, stock specific moves are more likely to dominate, at least for next six months period is my sense," he concluded.