Client Associates, a leading multi-family office provider in India, has predicted a strong recovery in corporate earnings in 2025-26, with growth estimated at 11.7%. This projection reflects optimism for the medium-term future, even though it is lower than the 20.1% earnings growth recorded in the previous fiscal year.
The firm’s Equity Assessment 2025 Report maintains a neutral stance on equities, citing higher valuations and global uncertainties that could lead to moderate returns in the high single digits with high volatility. Client Associates is also underweight on small and mid-cap stocks, highlighting the challenges posed by slower economic growth, lower private consumption, and higher inflation in recent quarters.
However, the firm expects corporate earnings to rebound in the next fiscal year, driven by an expected increase in government capital expenditure. This is anticipated to boost investment-led demand and rural consumption, leading to a significant improvement in overall economic growth.
Looking ahead to 2025, Client Associates emphasizes the undervaluation of large-cap stocks compared to mid and small-cap stocks. Large-cap stocks are trading at a PE ratio of 22, below their historical average of 24.2, making them an attractive value opportunity in a potentially volatile market environment.
In terms of sectoral outlook, the firm sees potential in sectors like healthcare, IT, and financial services to drive long-term growth, despite the challenges of a cyclical slowdown. Large-cap stocks, in particular, are identified as strong value opportunities as investors navigate a more cautious market in 2025.
Overall, Client Associates remains cautiously optimistic about Indian equities in 2025, anticipating a recovery in corporate earnings and potential value opportunities in large-cap stocks. The firm’s strategic outlook underscores the importance of sector selection and risk management in navigating the evolving market landscape.
