- BofA maintains NSE Nifty 50 target at 25,000 for end of 2025 with downside risk
- Nifty expected to fluctuate between 11% gain and 4% loss by December 2025
- BofA upgrades IT sector to Overweight, downgrades utilities to Neutral-weight
BofA sees Indian markets delivering muted return in calendar year 2025. The brokerage kept the target for the benchmark index NSE Nifty 50 at 25,000 by the year end. According to the brokerage, the risk is skewed towards downside.
Markets are reacting to emerging developments around US tariffs, monetary and fiscal policies, it said in its India strategy note on Tuesday. Despite target of 25,000, BofA expects the index to swing between 11–4% by December. The upper band indicates a bull case scenario, while the lower implies a lower band scenario.
Long-term investors with buy and hold strategy will likely to moderating returns. Investors who are flexible to rotate sectors in search of alphas will see better returns, BofA said.
BofA has moved IT sector to Overweight from Underweight, utilities to Neutral-weight, after noticing their underperformance to the NSE Nifty 50 index. The sectors have delivered 23% and 6% underperformance compared to the benchmark large-cap gauge on a year-to-date basis.
BofA estimated negative returns from small and mid-caps. However, it sees opportunity of good returns from materials, auto components, and travel and tourism, the note said.
Key Factors Behind Market Volatility
Earnings
Every earning seasons are likely to act as a period of correction as BofA expects fiscal stimulus and monetary measures will induce a shallow recovery in consumption, capital expenditure, and credit growth. BofA sees earnings growth of 7% and 11% in the financial year 2026 and 2027.
Trade Tariff
BofA expects terminal tariff rate at 15% which is already priced in by market participants. However, with recent developments challenging the base case may create ripples in the markets. In case, final tariff rates India turns out to be 25%, it will act as downside risk.
Capital Flows
In contrast to consensus, the risk-reward ratio for foreign institutional investors is unfavourable. Hence, BofA does not expect any revival on FII inflows to Indian capital markets.
Meanwhile, domestic institutional inflows have moderated to $4–6 billion from the peak of $8.6 billion in October 2024.
India's Policy Response
India may come up with policy reforms and offer fiscal support to boost growth and avoid tariff impact.
US Macroeconomic Outlook
Inflation in the US may spike up due to tariff which may revive the debate around the US Federal Reserve rate cuts. The effective tariff in the world's largest economy has rose to 16% this year from 2.3% in 2024.
Indian markets have 97% correlations.
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