High Expectations Pose Biggest Risk In Market For 2025, Says Vikas Khemani

Investors will have to tone down their return expectations in 2025 amid a stellar run-up and a challenging macro environment, according to Vikas Khemani, founder of Carnelian Asset Management And Advisors Pvt.

The market's stellar performance in recent years has led to overly optimistic return projections that may not align with current macroeconomic realities, he said.

“The biggest risk in the market is the risk of high expectations,” Khemani said. “Given the significant run-up in the past few years and a slightly challenging macro environment, returns this year are likely to be muted. Keep expectations low and the risk bar high.”

Khemani noted that the IT sector is an area with significant growth potential, despite scepticism about its performance. “People focus on three or four large companies and say IT isn't doing well. But within IT, many companies are growing at 15-20%. Technology disruption, aging populations, and market leadership will continue to drive growth in the sector,” he noted.

While large-cap IT companies may face challenges delivering higher growth, Khemani sees opportunities in smaller firms. “You don't have to chase the large companies. Focus on tier-2 or slightly smaller players where growth can outpace the industry,” he said.

Vikas Khemani, founder of Carnelian Asset Management & Advisors Pvt.

Consumption and Sectoral Outlook

Contrary to the prevailing narrative, Khemani dismissed concerns about a slowdown in consumption. “There is a change or disruption happening in consumption patterns, but that doesn't mean consumption is slowing down,” he said. “For the first time in five years, we've bought consumption stocks.”

He also expressed optimism about the banking and financial sector. “Last year wasn't great for banking and financials, but this year will be much better. Most of the pain is behind us, and expectations are low,” Khemani said.

Khemani identified three sectors with strong opportunities for 2025: banking, pharmaceuticals and healthcare, and manufacturing. “Real money is made when you move beyond narratives," he said.

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