The Indian stock market has trailed other emerging markets in 2025, weighed down by foreign portfolio investor (FPI) outflows, a weaker rupee, and global trade concerns, according to Mahesh Patil, Chief Investment Officer at Aditya Birla Sun Life AMC, which manages $45.7 billion in assets.“Year-to-date, the Indian market has underperformed the emerging market by almost 26% in dollar terms. That’s a large underperformance,” Patil said. He explained that investors shifted to other recovering markets like China and Europe, creating capital outflows from India.Patil pointed to three major pressures: global trade tensions with the US, rupee depreciation, and foreign direct investment (FDI) flattening. “Rupee against the dollar in this quarter is down 5%,” he noted, adding that the currency drop reduces dollar returns for overseas investors.
Consumption revival and household debtPatil expects India’s consumption growth to be a key investment theme, supported by interest rate cuts, favourable monsoons, and tax relief. But he cautioned that high household debt could slow the pace of recovery. “Some amount of that savings will go towards de-leveraging also,” he said, pointing out that personal loans may take priority over spending.Also Read | Large NBFCs, private banks better placed than PSU lenders in coming rally: Manulife’s Rana GuptaHe sees opportunities in the auto sector, where pent-up demand could trigger a replacement cycle. “If you look at pre-COVID and now, the growth hasn’t been much,” Patil remarked, suggesting stimulus could unlock demand. Consumer staples and value retail are also expected to benefit from higher disposable incomes.IPO market vs secondary marketThe Indian IPO market remains strong despite weak secondary market sentiment. Patil attributed this to the quality of new issuers: “If you look at the companies which are coming in in the primary market, they are slightly differentiated companies. They are high-growth companies.”
This demand for IPOs has led to portfolio churn as investors sell existing holdings to fund allocations. With billion-dollar offerings in the pipeline, Patil said liquidity pressures on the secondary market are likely to continue.IT sector outlookOn the Indian IT sector, which has been hit by concerns over US visa policies, Patil said the financial impact is small. The direct impact of the proposed visa changes is in the range of just 1-3%, which is not all that big, he said. He argued that valuations are now reasonable and that US rate cuts could revive discretionary spending, supporting Indian IT companies.Also Read | No FMCG in portfolio; prefer telecom, housing and credit as consumption plays: Sohum AMCPower sector and capital goodsPatil highlighted the power and utilities sector as another key opportunity. He sees strength in power transmission and distribution (T&D), backed by rising investments in coal and capital goods infrastructure.Diversification strategyFor investors, Patil recommends diversification through multi-asset allocation funds. “Nobody believed that gold could give you 40% return…and equities would be flat,” he said, pointing to gold’s recent performance as proof of spreading risk.He added that equities are “fairly priced” with moderate growth ahead, while fixed income could benefit from a duration play as interest rates peak. Patil concluded that multi-asset funds remain attractive because they offer stability across uncertain market cycles.For more, watch the accompanying video
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