Stock markets bid goodbye to 2024 on a not so good note with the benchmark Sensex ending lower 109 points and experts forecasting moderate returns in 2025.

In the last session of 2024, the 30-share Sensex plummeted 687.34 points to touch a low of 77560.79.
However, it recouped part of these losses to end with a loss of 109.12 points or 0.14 per cent at 78139.01. On the NSE, the broader Nifty 50 fell marginally 0.10 points to settle at 23644.80.

In 2024, the Sensex jumped 5898.75 points thereby giving a return of 8.16 per cent whereas the Nifty surged 1913.4 points or 8.80 per cent.

However, the broader markets have again outperformed with the Nifty midcap 50 index rising 21 per cent, the Nifty smallcap 50 index 25.3 per cent and the Nifty 100, 20.04 per cent.

Last year, the benchmark indices had showed solid gains when they jumped 18.8 per cent and 20 per cent, respectively, over 2022.

The relatively lower returns have been attributed to expensive valuations, muted earnings and FPI outflows. 2024 was also marked by key events that included the general elections where the ruling BJP did not get a majority on its own, and the Israel-Iran conflict.

During the year, the Sensex hit a record peak of 85978.25 on September 27 and the Nifty 50 touched a lifetime high of 26277.35.

However, they have slipped from these highs with foreign investors aggressively pressing the sell button particularly in the secondary markets.

Stocks have been rattled by the US Federal Reserve which indicated slower pace of interest rate cuts in 2025 and also the election of Trump who is expected to bring in protectionist policies leading to higher inflation.

Market analysts feel that this will increase the attractiveness of assets such as the US dollar and treasuries leading to outflows from emerging markets.

Brokerages feel in the near term, stocks will react to the earnings season which will kick off from January 13 when HCL Technologies declares numbers for the third quarter ended December 31, 2024. This will be followed by Infosys on January 16.

While the third quarter is a seasonally weak period for IT companies, analysts remain divided on whether October-December 2024 will show some improvement for other sectors on a sequential basis.

Twin developments

The earnings season will also coincide with Trump taking charge as the 47th President of the United States. Reverberation of his policies will be felt on riskier assets such as stocks and even the rupee.

This will be followed by the Union budget. The hope is that finance minister Nirmala Sitharaman will address the issue of a slowdown in urban demand by giving tax reliefs. The stock markets are also expecting that she will give some good news on long-term capital gains tax (LTCG).

For now, brokerages are projecting that the Nifty could rise 8-10 per cent in 2025. While Citi has a December 2025 target of 25000, it is 27,000 for Goldman Sachs, 26500 for Bank of America Merrill Lynch and 26600 for Jefferies.

A note from Geojit Securities says the uncertainty surrounding Trump’s economic policies and high valuation may impact the stock market in the short term, particularly in emerging markets.

``There are no signs of recession, though tapering could influence valuations. A balanced approach, including specific stocks and sectors, along with investments in gold, silver, and debt instruments, is essential for portfolio stability,’’ the brokerage said.

It is forecasting a base target of 26300 for December 2025 suggesting a moderate return of around 11 per cent from the current levels supported by expected earnings revamp from Q3.

Swapnil Aggarwal, director, VSRK Capital, said as investors approach 2025, the domestic stock market could see a year of moderate growth, with sector-specific opportunities in capital goods and infrastructure, financial Services, IT, healthcare and pharmaceuticals.

``Investors should approach the market with caution, balancing the opportunities with the inherent risks. Overall, 2025 promises sector-specific growth, but careful navigation of the market will be key to successful investing’’, he said.