Market corrections are opportunities to invest in large-cap or strong companies at reasonable valuations, according to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company.

“With earnings growth set to drive the market and limited room for P/E expansion, it is essential to moderate return expectations and focus on sustainable, long-term growth.”

Kotak AMC sees fixed income investments as a compelling opportunity for investors seeking sustainable returns in the current market scenario. With interest rates on a structural decline but expected fluctuations, focusing on longer-duration instruments, 12 to 18-month horizon, would allow investors to benefit from potential future rate cuts, it said in the the latest market outlook report for 2025

Capex revival, financial services, technology, consumption revival and healthcare are the domains that Kotak Mahindra AMC believes will aid the market in 2025.

The country is already into a crucial multi-year capex cycle, which is expected to drive significant economic growth, Kotak said. It emphasised that the Central Government and listed entities’ spending is likely to grow while State spending would lag.

“While increased Government spending and strong consumption trends fuel optimism, value opportunities exist in sectors like private banks, auto, telecom, pharma and IT,” Shah added.

Kotak noted that the banking sector has seen healthy return rations and steady capital adequacy levels downsizing the need for fresh capital. The narrowing gap between bank credit growth and deposit growth could ease pressure on margins, it added.

On the information technology front, Kotak expects a boost in spending, with increased investment in cloud services. “One of the key drivers for the sector is the rise of generative AI. AI demand is expected to grow 15X from 2022 to 2027E,” it said.

The consumption sector has undergone mixed recovery post-Covid, with premium products outperforming, Kotak said. It added that the shift to organised retail is a key driver for the sector.

Kotak AMC also projects that healthcare spending would increase with rise in per capita GDP.

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