Government Capex, Trump Policies To Be Key Determinants Of 2025 Rally, Says Rajesh Bhatia

Investors should brace for tempered market returns in 2025 as macroeconomic uncertainties and government spending hold the key for the bull rally to continue, according to Rajesh Bhatia, chief investment officer at ITI Asset Management Ltd.

While the markets enjoyed a stellar run from March 2023 to September 2024, Bhatia noted a recent correction due to reduced government expenditure.

“This is a year to lower your expectations of returns,” Bhatia said. “We’ve had an excellent bull market, but the slowdown in government spending has impacted corporate results, and Trump’s election win introduces a degree of global uncertainty.”

Bhatia highlighted the importance of government expenditure in driving economic growth. “Government spending was the only GDP component driving up the economy. A rebound in this area could help address the current slowdown,” he said.

However, he cautioned that corporate earnings might remain muted until there is greater visibility of an economic revival. “With the rupee and global interest rates where they are, monetary flexibility is reduced, and repairing the slowdown will take time,” Bhatia said.

The current market correction is part of a longer-term bull market, Bhatia said. “If you’re a long-term investor, stay invested. But keep your expectations low and avoid over-speculating in the current environment,” he advised.

While he doesn’t foresee a bear market unless there are significant macroeconomic shifts, Bhatia said the direction of the markets depend on Trump’s policies.

Additionally, the upcoming Union Budget will be a critical moment for the Indian market, he said. “The government’s approach—whether it prioritises macroeconomic stability or focuses on growth—will give clearer direction,” Bhatia said.

For now, the focus remains on managing expectations and monitoring key macroeconomic developments that will shape market dynamics. “The first half of the year may see slower recovery, but long-term investors should remain patient,” he said.