Dear Associate,
As we begin the new year, I wish you and your family a year filled with success, prosperity and well-being.
The current global macroeconomic landscape presents a mixed picture of challenges and cautious optimism. Global growth is expected to remain stable, with most forecasts placing it around 3.0%-3.2%. Two large economies are staring at policy shifts and trade wars which can also have potential ramifications in other parts of the world. Central banks are likely to maintain a cautious stance on monetary policy, continuing their gradual normalization of interest rates after a period of tightening. Geopolitical tensions, tariff wars, and forex tensions could pose downside risks to the global economy.
India is expected to maintain its position as one of the fastest-growing major economies. GDP growth for 2025 is estimated at around 6.5%. India's economic outlook remains positive, with strong domestic fundamentals and supportive government policies. Inflation in India is also showing signs of moderation, with the Reserve Bank of India (RBI) proactively managing inflation through monetary policy measures. Private consumption and investment are key drivers of India's economic growth. Factors such as rising incomes, urbanization, and a young population contribute to strong domestic demand. The government continues to prioritize infrastructure development, which is expected to boost economic activity and create employment.
The Indian capital market has experienced remarkable growth over the past five years. Demat accounts surged 4.4x to 179 million, NSE active accounts surged 4.9x to 49 million, and unique mutual fund investors increased 2.4x to 50 million from FY20 until October 2024. Demat penetration in India stands at ~12%, compared to ~62% in the USA. The HNI and UHNI segments are also clocking a ~12% CAGR and are expected to sustain this momentum in the years ahead.
The Indian stock market is currently navigating significant volatility, driven by a mix of global and domestic factors. Rising inflation, potential trade-related issues, and global market turbulence due to geopolitical tensions and economic uncertainties are fuelling price fluctuations. While this presents both risks and opportunities, it is important to remember that volatility is a natural part of the investment cycle. For long-term investors, it can present the opportunity to acquire fundamentally strong stocks at attractive prices.
The Indian mutual fund industry continues to grow rapidly. The average assets under management for the mutual fund industry stood at approximately ₹68 lakh crores as of November 2024, more than doubling over the past five years. Indian mutual funds currently have about 10.23 crore SIP accounts, through which investors regularly invest in Indian mutual fund schemes. The Mutual Fund AUM-to-GDP ratio for India is much less than the global average, further highlighting the growth opportunity for the industry.
For new investors, the current market volatility presents a unique opportunity to begin investing for the long term through SIPs and STPs. Multi-asset allocation funds, which diversify investments across asset classes like stocks, bonds, gold, and silver, offer added stability in uncertain times. Balanced advantage funds, which adjust their stock allocations based on market valuations, are also an excellent choice. A strong core portfolio should focus on a mix of well-established large-cap stocks, along with small- and mid-cap funds, to balance stability with growth potential.
2025 is expected to be a year of significant changes and opportunities. By staying informed and maintaining a diversified, long-term investment strategy, investors can navigate the complexities of this changing environment and achieve their financial goals.
Sources: MOFSL, NSE, NSDL, CDSL, IMF, ABSLAMC Research
Issuer(s) / Stock(s) / Sector(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the same, from time to time.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
