This report is from this week’s CNBC Inside India newsletter, bringing you up-to-date, insightful news and market commentary on the emerging powerhouse and the major companies behind its meteoric rise. Do you like what you see? You can log in Here.

The stock market in India did not have the best start to this year. Fears of high valuation metrics and reduced profit expectations have led to a steady decline Fancy 50.

Since its last peak in late September, the index has now re-entered correction territory – a 10% decline.

In fact, the benchmark has been in the red since the beginning of the year. However, this is nothing unusual for investors. By my count, in seven of the last ten years, the Nifty 50 turned negative on the fifth trading day of the year.

However, this time it is different. Rather than taking an optimistic view, many analysts began the new year expressing concerns about elevated valuations and slowing corporate earnings growth.

It is a far cry from the optimistic mood of yesteryear that the Indian stock market would run ahead of the curve S&P 500which rose by more than 20% for the second year in a row.

HSBC equity strategists believe the gloomy mood in the markets is likely to continue.

“With earnings disappointing – consensus has cut growth estimates for the NIFTY 50 (FY2025) from 15% to 5% – investors are likely to reassess their positions, which will cap market returns,” Asia Pacific strategists said Bank led by Herald van der Linde in a note to customers on Thursday. The investment bank downgraded Indian stocks to neutral.

Morgan Stanley pointed out that stocks underperformed bonds and gold (which, to be fair, outperformed most global markets) last year for the first time in eight years.

““In the long term, we believe stocks will lead among financial assets and gold will stand out among physical assets,” said Ridham Desai of the investment bank.

Many are also convinced that Indian stocks are now ripe for investment after their long decline.

“India has bottomed out,” Venugopal Garre, a strategist at Bernstein, wrote in a note to clients last week. Garre expects economic growth to pick up over the next three to six months and is urging investors to anticipate the turnaround. “It is recommended to invest before recovery,” he added. Bernstein expects the Nifty 50 to end the year at 26,500, up 13% from current levels.

The central government is likely to reduce the fiscal deficit in February when it presents its budget, which could lower bond yields and reduce borrowing costs for companies, according to Morgan Stanley.

This view is shared by equity strategists at Citi. They expect India’s economy to grow 6.5% this year, fueled by a boost from government infrastructure spending that was in the doldrums last year.

“We have a constructive outlook on equity returns given the market’s more reasonable valuations following the recent corrections,” Citi’s Surendra Goyal said in a note to clients. The investment bank also expects Nifty to end the year at 26,000 – up 10.5%.

Indian authorities expect the Indian economy to grow by 6.4% in the 2024-2025 financial year. India’s National Statistics Office issued its first advance forecast on Tuesday, the lowest since 2020, when India’s gross domestic product contracted 5.8% due to the pandemic. The estimate is lower than the Reserve Bank of India’s forecast of 6.6% for the current financial year. Here’s what economists from HSBC and HDFC Bank think of the estimate.

India wants the country’s foreign missions to help boost exports. India’s Commerce Ministry has asked Indian missions to step up their market research efforts and identify export opportunities, government sources told CNBC-TV18. Commercial heads of Indian missions in 20 key countries will gather for a three-day meeting organized by the ministry that will focus on growing exports.

Trump’s second term will benefit Indian equities, portfolio manager says. US President-elect Donald Trump’s plans to impose high tariffs on China make India’s geopolitical positioning “favorable in this Trump 2.0 era,” according to Kunal Desai, portfolio manager at GIB Asset Management. “A number of Indian companies are taking advantage as customers look to adopt a dual-source approach to their supply chain,” Desai said.

India is a “compounding machine”. Investor interest in India waned at the end of 2024 due to a decline in Indian stocks during this period. However, one portfolio manager remains optimistic about the country. The market decline is a buying opportunity, he says, and names three Indian stocks to buy for 2025.For subscribers only)

Indian stocks started the year with a decline. The Fancy 50 The index closed at around 23,500 points, down 1.8% since last week.

The benchmark 10-year Indian government bond yield has remained unchanged so far this year, at around 6.76%.

Speaking on CNBC television this week, Abhiram Eleswarapu, head of Indian equities at BNP Paribas, believes Indian markets are currently going through a “soft phase” as valuations are at elevated levels. However, this “shallow correction” may be coming to an end, and the markets could Eleswarapu said the numbers would be in the high single digits from March to the end of the year.

Meanwhile, Pulkit Patn, Indian industrial analyst at Goldman Sachs, noted that the bank expected India’s cement industry will expand in the second half of the year, suggesting that “infrastructure spending is coming back.” Government spending, housing and rural spending will account for the bulk of this investment, resulting in relatively strong demand for infrastructure and related materials.

A busy week as major economies release inflation data while Indian companies Standard Glass Lining Technology, Capital Infra Trust and Quadrant Future Tek list publicly.

January 10: US non-farm payrolls for December, UK consumer price index for December

January 12: China’s consumer price index and trade balance for December

January 13: Indian Consumer Price Index for December, IPO of Standard Glass Lining Technology

January 14: Capital Infra Trust IPO, Quadrant Future Tek IPO, US Producer Price Index for December

January 15: US consumer price index for December, India’s trade balance for December

January 16: UK gross domestic product for November