Indian Stock Market Loses Momentum as Valuations Stir Concerns
Stocks that soared in India during 2024 are struggling in the early months of 2025, with investors questioning the sustainability of high valuations given reported earnings.
Technology giant Zomato Ltd., which more than doubled in the previous year, has plummeted 22% since January due to disappointing results. Real estate leader Oberoi Realty Ltd. has lost 24%, with losses intensifying following missed profit expectations.
The broader Indian stock market has also sold off, with the NSE Nifty 50 Index down 12% from its September peak. Despite the decline, valuations remain elevated compared to other emerging Asian markets, according to Bloomberg data.
"Asset managers are concerned about valuations and whether they are justified by fundamentals," said Arvind Subramanian of Morningstar Inc.
Small-cap stocks have been particularly hard hit after outperforming their larger counterparts in 2024. Power equipment manufacturer GE Vernova T&D India Ltd. has fallen 16% this year ahead of its earnings release, following a 300% gain in 2024.
Despite the setbacks, some analysts see a long-term growth story intact for India. Valuations have cooled somewhat, with the Nifty 50 now trading slightly below its five-year average of around 19 times forward earnings.
However, Kunal Vora of BNP Paribas SA notes that initial earnings reports for the December quarter have been underwhelming. He cautions that earnings estimates for the next two years may be overly optimistic and require an improvement in the economic outlook.