Highlights:
- FII outflows in 2025 stand at ₹1.06 lakh crore, driven by concerns over weak earnings, overvaluation, and a strong dollar.
- Emkay Institutional Equities projects Nifty reaching 25,000 by December 2025, backed by economic recovery, better employment trends, and higher government spending.
- Foreign Portfolio Investor (FPI) selling is expected to stabilize post-Q1 2025, with improving earnings outlook and reduced rupee depreciation concerns.
- Reserve Bank of India (RBI) liquidity measures likely to benefit Indian equities, especially in the Banking, Financial Services, and Insurance (BFSI) sector.
- Domestic Institutional Investors (DIIs) have poured in over ₹1 lakh crore so far in 2025, offsetting foreign investor outflows.
- Top investment picks across large-cap, mid-cap, and small-cap segments identified for potential gains.
FII Selling to Stabilize by Q2 2025
Emkay Institutional Equities anticipates that the selling pressure from Foreign Institutional Investors (FIIs), which has weighed on the market since the beginning of 2025, will start easing from April.
Current Market Scenario:
- FIIs have been net sellers of ₹1,06,445 crore in 2025, largely due to:
- Concerns over weak corporate earnings.
- Expensive market valuations, particularly in the broader indices.
- A strong US dollar putting pressure on the Indian rupee, reducing foreign investment attractiveness.
- However, foreign investors turned net buyers on February 20, purchasing ₹4,786.56 crore worth of equities, signaling possible stabilization in selling activity.
Factors Supporting Market Recovery:
- Earnings Forecast Bottoming Out: Analysts expect corporate earnings to recover in H2 2025, improving investor sentiment.
- DXY Index Stabilization: A peak in the US Dollar Index (DXY) could ease rupee depreciation concerns, making Indian markets more attractive for FPIs.
- RBI’s Liquidity Measures: The Reserve Bank of India’s supportive policies are expected to enhance liquidity in domestic markets, especially benefiting the BFSI sector.
Nifty 50 Target at 25,000 by December 2025
Emkay Institutional Equities has set an ambitious Nifty 50 target of 25,000 by December 2025, citing multiple economic recovery drivers:
- Gradual recovery in consumption, driven by improving macroeconomic conditions.
- Better employment trends, leading to higher disposable income.
- Revival in unsecured lending, enhancing liquidity in financial markets.
- Increased government welfare spending, which could boost economic growth and market sentiment.
Expert Viewpoint
According to Nirav Sheth, CEO – Institutional Equities at Emkay, the worst phase of the earnings downgrade cycle may be over. He expects stronger earnings growth in H2 2025, supported by:
- Renewed government spending initiatives.
- Tax relief measures, which could stimulate consumer demand.
- Strong domestic liquidity conditions, reinforcing confidence in Indian equities.
Sheth stated, “We believe that the market is at a turning point. With economic indicators improving and liquidity conditions easing, investors should take advantage of the current market scenario. It is time to buy.”
Top Investment Picks for 2025
Large-Cap Stocks:
- Lupin – Strong growth in the pharmaceutical sector with a robust pipeline.
- Zomato – Benefiting from increasing online food delivery demand.
- Tata Motors – Strong EV growth and leadership in the auto sector.
- IndusInd Bank – Positioned well in the banking sector recovery.
Mid-Cap Stocks:
- Escorts – Gaining from strong demand in the agriculture and auto segments.
- Paytm – Expanding digital payments and financial services footprint.
- Metropolis Healthcare – Riding the wave of rising healthcare demand.
Small-Cap Stocks:
- Stovekraft – A strong player in the consumer appliances market.
- Quess Corp – Benefiting from India’s growing employment and HR outsourcing industry.
DII Inflows Counteracting FII Selling
- Domestic Institutional Investors (DIIs) have invested over ₹1 lakh crore in equities so far in 2025, nearly matching the FII outflows.
- This strong DII participation underscores continued domestic confidence in India’s economic and corporate growth story.
- The influx of domestic funds is helping stabilize market volatility amid global economic uncertainties.
Market Outlook: Time to Buy?
With FIIs expected to return as net buyers, a strong domestic investment base, and government-driven economic stimulus, Emkay Institutional Equities remains bullish on Indian markets.
The brokerage has set a Nifty 50 target of 25,000 by year-end, advising investors to capitalize on the ongoing market correction and invest in high-potential stocks for long-term gains.
Conclusion
As global macroeconomic conditions improve, and with strong domestic liquidity and fiscal support, the Indian stock market is poised for significant growth in 2025. Investors should position themselves strategically to benefit from the expected market uptrend.
