India's High-Flying Stocks Struggle in 2025 Amid Valuation Scrutiny
Top-performing Indian stocks in 2024 have faced a dismal start to 2025 as investors question whether earnings justify lofty valuations.
Tech and Real Estate Losers:
Zomato Ltd., the tech darling that soared over 100% in 2024, has plummeted 20% this year after disappointing results. Real estate giant Oberoi Realty Ltd. has dropped 23%, accelerating losses after missing profit expectations.
Broader Market Sell-Off:
The setbacks are part of a broader decline in Indian equities, with the NSE Nifty 50 Index down 12% from its September high. Despite the correction, the market remains relatively expensive compared to other Asian emerging markets, according to Bloomberg data.
Valuation Concerns:
"Asset managers are primarily concerned about valuations and their alignment with fundamentals," said Arvind Subramanian of Morningstar Inc. Asian investors struggle to find attractively priced opportunities in India, he added.
Small Cap Decline:
Small caps have been disproportionately affected after outperforming larger companies in 2024. GE Vernova T&D India Ltd., which surged over 300% last year, has lost 15% ahead of its earnings report.
Bullish Outlook:
Despite the setbacks, market bulls maintain that India's long-term growth story remains intact. Valuations have moderated somewhat, with the Nifty 50's multiple now slightly below its five-year average.
Tepid Results and Cautious Outlook:
However, Kunal Vora of BNP Paribas SA notes that initial results for the December quarter "do not seem very encouraging." Earnings estimates for the next two years "appear slightly optimistic and require an improved economic outlook to materialize," he said.