India’s market to face slowing earnings, domestic hurdles, and global pressures: Lighthouse Canton

The Indian stock markets could face a slowdown in earnings growth after a strong five-year run, even as the economy is expected to grow at 6.7% in the next financial year, according to Lighthouse Canton’s India Outlook 2025 report.

The global investment institution’s report, released on Thursday, highlighted key risks to investor sentiment, including recalibrating market valuations, external currency pressures, and uncertainties in commodity markets.

The report noted that while India’s economic growth remains promising, the next phase will depend on how earnings recover. Factors such as government capital expenditure, tax relief for the middle class, and improving consumption trends will play a crucial role in sustaining momentum. However, the high volume of initial public offerings (IPOs) in 2024, combined with declining demand from foreign investors, could weigh on market performance.

"India’s economic engine continues to offer long-term promise, but 2025 will require greater selectivity and discipline,” said Sumegh Bhatia, Managing Director and CEO of Lighthouse Canton in India.

Global headwinds and domestic challenges

The report pointed to significant global challenges that could impact India’s economic outlook. A strong US dollar—supported by growth and the possibility of tighter monetary policy—has put pressure on emerging market currencies, including the Indian rupee. Additionally, gold prices surged in 2024 due to geopolitical tensions and central bank buying, and investor interest in precious metals is expected to remain strong in 2025.

On the other hand, crude oil prices are likely to stay subdued as increased supply from non-OPEC countries and weakening global demand exert downward pressure. These factors add to the broader uncertainty for Indian markets, which are adjusting to a phase of macroeconomic recalibration.

Domestically, India’s growth momentum—driven in recent years by public sector investment—is beginning to normalise. The government has signalled a cap on capital expenditure, while private sector investments have yet to see a significant uptick.

Meanwhile, the Reserve Bank of India (RBI) recently announced a 25 basis-point rate cut, the first in nearly five years, signalling a shift in policy to support growth amid subdued consumer demand.

Navigating 2025: A test for investors

Lighthouse Canton’s report suggested that investors will need to be cautious as they navigate a shifting economic and market landscape. With global trade frictions, policy uncertainty, and high equity valuations in developed markets, investment strategies will require greater selectivity. The firm’s outlook emphasises that while India remains a key market for long-term growth, investors should focus on identifying resilient opportunities and adapting to evolving cycles.

As India enters a period of macroeconomic adjustment, the report provided insights into balancing domestic fundamentals with global trends, offering a framework for managing risks and capitalising on emerging opportunities.