India

The Multi-Decadal Opportunity

in a World of Uncertainties

Annual Outlook
Table of Contents
Macro Overview & Outlook
GDP ……………..………….…………………………………………………………… 02
Inflation ……………………………………………..……………………….................. 03
Key Commodities ……….……………………………………………………………… 05

Equity Market Overview & Outlook

Equity Market Overview ………..………………………………………….................. 07
Key Trends Observed in 2024 …………………………………..……………………. 08
Way Forward for Equity Markets …………………….……………………………….. 09

Fixed Income Overview & Outlook

Global Monetary Policy and Outlook ……………...……………...…………………. 13
Domestic Monetary Policy and Outlook ……………………………………………… 14

Mutual Fund Industry Overview & Outlook

Key Trends in the Mutual Fund Industry in 2024 …………………………………… 17
Way Forward …………………………………………………….……………………... 21

The map shown is only for representation purpose and not to scale with actual political boundaries
Macro Overview &
Outlook

Annual Outlook 2025 01

Macro
Overview & Outlook
Global GDP
2024 2025 2026
India 6.8 India 6.9 India 6.8
Indonesia 5.1 Indonesia 5.2 Indonesia 5.1
China 4.9 China 4.7 China 4.4
Russia 3.5 Russia 1.1 Russia 0.9
Türkiye 3.5 Türkiye 2.6 Türkiye 4.0
World 3.2 World 3.3 World 3.3
Brazil 3.2 Brazil 2.3 Brazil 1.9
US 2.8 US 2.4 US 2.1
Korea 2.3 Korea 2.1 Korea 2.1
Mexico 1.4 Mexico 1.2 Mexico 1.6
Canada 1.1 Canada 2.0 Canada 2.0
Australia 1.1 Australia 1.9 Australia 2.5
Saudi Arabia 1.0 Saudi… 3.6 Saudi… 3.8
UK 0.9 UK 1.7 UK 1.3
Euro Area 0.8 Euro Area 1.3 Euro Area 1.5
Japan -0.3 Japan 1.5 Japan 0.6

Note: India projections are based on fiscal years, starting in April. | Source: OECD Economic Outlook

Global GDP growth is expected to be 3.2% this year, Japan, will drive growth in Asia. However, downside risks
increasing to 3.3% in 2025 and 2026. Demand will be include geopolitical tensions, oil supply disruptions, and
supported by low inflation, steady employment growth, rising tendencies of protectionism. Positive surprises
and less restrictive monetary policy, despite fiscal could arise from improved consumer confidence, early
tightening. Strong domestic demand in India and resolution of geopolitical conflicts.
Indonesia, along with stimulus measures in China and

Domestic GDP
Real GDP % YoY Growth
9.7%

8.2%

7.2% 7.3%
7.0% 6.9%
6.7% 6.8%
6.6%

5.4%

2021-22 2022-23 2023-24 PE Q1 FY25 Q2 FY25 Q3 FY25 Q4 FY25 2024-25 Q1 FY26 Q2 FY26
FRE Estimates Estimates Estimates Estimates Estimates
FRE: First Revised Estimates , PE: Provisional Estimates Source: MOSPI, RBI

02 Annual Outlook 2025

India's domestic growth outlook remains resilient despite government capital expenditure. The services sector
recent challenges. Q2FY25 GDP growth was 5.4%, continues to expand, with the PMI for services at 58.4 in
lower than expected, due to a slowdown in industrial November. Overall, real GDP growth for 2024-25 is
growth. High frequency indicators suggest domestic projected at 6.6%, lower than previously projected 7.2%
slowdown bottomed out in Q2FY25. However, recovery can largely be attributed to the lower than expected
signs are evident, driven by strong festive demand and growth in Q2FY25. However, in the subsequent four
rural activities. Agricultural growth is supported by quarters growth is expected to remain on an average
healthy kharif production and better rabi sowing. above 7.0%, supported by strong domestic demand and
Industrial activity is expected to normalize, aided by prudent government policies.

Global Inflation
2024 2025 2026

Türkiye 58.3 Türkiye 30.7 Türkiye 17.2

Russia 8.2 Russia 7.0 Russia 5.2

India 4.8 India 4.2 India 4.0

Mexico 4.7 Mexico 3.3 Mexico 3.0

Brazil 4.5 Brazil 4.2 Brazil 3.6

Australia 3.2 Australia 2.3 Australia 2.6

UK 2.6 UK 2.7 UK 2.3

Japan 2.6 Japan 1.9 Japan 2.1

US 2.5 US 2.1 US 2.0

Euro area 2.4 Euro area 2.1 Euro area 2.0

Canada 2.4 Canada 2.0 Canada 2.1

Indonesia 2.3 Indonesia 2.2 Indonesia 2.4

Korea 2.3 Korea 1.8 Korea 2.0

Saudi Arabia 1.6 Saudi Arabia 1.7 Saudi Arabia 2.0

China 0.4 China 1.1 China 1.4

Source: OECD Economic Outlook, RBI

Note: India projections are based on fiscal years, starting in April.

Headline inflation has eased in most countries through core inflation remains higher than desired in many
2024, driven by declines in food, energy, and goods countries, indicating persistent price pressures.
prices. Brazil and India saw significant drops in inflation,
Several factors could lead to higher core inflation,
though it has recently risen again in both. In China,
including high services inflation due to labor intensity and
inflation remains very low due to subdued food prices. By
potential labor shortages, rising goods prices from trade
October, headline inflation had returned to central bank
restrictions, and increased global shipping costs. There
targets in about two-thirds of advanced economies and
is significant variation across countries in these trends.
three-fifths of emerging-market economies. However,

Annual Outlook 2025 03

Domestic Inflation
%YoY
CPI Inflation Core inflation
9.00%
RBI Inflation Target Band
8.00%

7.00%

6.00%

5.00% 5.48%

4.00%

3.00% 3.60%

2.00%

1.00%

0.00%
Jan-24

Jun-24

Jul-24
Mar-24
Feb-24
Dec-23

Aug-24

Sep-24

Nov-24
Apr-24

May-24

Oct-24
Source: MOSPI

Over the past 12 months, domestic headline inflation has Over the past year, core inflation in India has generally
mostly stayed within the RBI’s tolerance band, briefly moderated, hitting its lowest levels in over four years. This
falling below 4.0% in July and August 2024 before decline was primarily due to broad-based moderation
rebounding and exceeding 6.0% in October. The average across various sub-groups such as clothing and footwear,
month-on-month inflation from December 2023 to household goods and services, health, education, and
November 2024 was around 5.0%. Significant personal care. Additionally, declines in transport and
fluctuations were driven by changes in food prices and communication costs, influenced by cuts in petrol and
varying base effects, with notable increases in August, diesel prices, also contributed to the overall decrease.
September, and October due to unfavorable base effects However, a rise in mobile tariffs in recent months has
and positive momentum across all CPI sub-groups. added some upward pressure on core inflation.

04 Annual Outlook 2025

Key Commodities
Commodity prices are expected to decrease by 5% in prices rise, along with stable metals and agricultural raw
2025 and 2% in 2026*, reaching their lowest levels since materials doing the balancing act.
2020. Oil prices will lead the decline, while natural gas * World Bank Commodity Market Outlook

%YoY Change

Commodity Unit 2022 2023 2024f 2025f 2026f 2024f 2025f 2026f

Energy

Crude Oil, Brent $/bbl 100 83 80 73 72 -3.1% -8.8% -1.4%

Metals and Minerals

Aluminium $/mt 2,705 2,256 2,475 2,500 2,600 9.7% 1.0% 4.0%

Copper $/mt 8.822 8,490 9.250 9,300 8,500 9.0% 0.5% -8.6%

Iron ore $/dmt 121 121 108 95 90 -10.4% -12.0% -5.3%

Lead $/mt 2,151 2,136 2,100 2,050 2,100 -1.7% -2.4% 2.4%
Nickel $/mt 25,834 21,521 17,000 17,500 18,500 -21.0% 2.9% 5.7%

Tin $/mt 31,335 25,938 30,000 32,000 34,000 15.7% 6.7% 6.3%

Zinc $/mt 3,481 2,653 2,700 2,600 2,500 1.8% -3.7% -3.8%

Precious Metals

Gold $/toz 1,801 1,943 2,350 2,325 2,250 20.9% -1.1% -3.2%

Silver $/toz 22 23 28 30 31 19.7% 7.1% 3.3%

Platinum $/toz 962 966 1,000 1,050 1,100 3.5% 5.0% 4.8%

Notes: f = forecast; Source: World Bank Commodity Price Forecasts

Brent Crude Precious Metals

Brent oil prices are projected to average $80/bbl in 2024, Gold prices are expected to stay elevated amid
then decrease to $73/bbl in 2025 and $72/bbl in 2026, geopolitical risks, with further tensions potentially
assuming OPEC+ maintains supply cuts. Prices could pushing prices higher. Tight supplies should support
rise to $85/bbl with supply disruptions or fall to $66/bbl if higher platinum and silver prices, but weaker industrial
cuts are reversed. Additionally, weaker-than-expected activity may reduce demand, causing prices to fall below
output growth in China, indicated by recent declines in the projections.
purchasing managers' index (PMI), poses a downside risk
to these projections.

Metals and Minerals

The metals and minerals prices are expected to be
impacted by a) Upside risks which include China’s
stimulus and supply disruptions b) Downside risks
involving weaker growth in major economies.

Annual Outlook 2025 05

 Equity Market
Overview & Outlook

06 Annual Outlook 2025

Equity Market
Overview
Global Equities
Chart 1: 2023 and CY24YTD Geographical performance based on MSCI country level Indices

Europe 17%
2%

Emerging Markets 7%
5%

Japan 18%
7%

Asia 9%
8%

Asia ex Japan 4%
10%

China -13%
13%

India 20%
14%

World 20%
19%

US 25%
27%
Source: Bloomberg, CY24YTD as on 29, November 2024, returns in USD CY23 CY24YTD

Despite the year's volatility, global equities have shown highest returns while Chinese equities rallied following
strong performance in CY24YTD, with the MSCI ACWI substantial stimulus measures introduced in late
index up by 19%. Major regions, including the US, September 2024. A strong driver of equity returns over
Japan, China, and India, have seen significant gains, the last 12 months in the US has been the resiliency of
indicating widespread investor confidence and resilience. corporate earnings defying almost all expectations for
Among developed markets, the US has delivered the slower growth.

Domestic Equities
Chart 2: 2023 and CY24YTD Performance of indices across market caps

20%
Nifty 50
11%

20%
Nifty 100
14%

26% CY23
Nifty 500
17% CY24YTD
44%
Nifty Midcap 150 Index
22%

48%
Nifty Smallcap 250 Index
26%

Source: Bloomberg, CY24YTD as on 29, November 2024

Annual Outlook 2025 07

The Indian markets commenced CY24 on a robust note, translated into weak corporate earnings. The slowdown
with the Nifty reaching new highs and gaining was led by manufacturing with capex’s share falling and
approximately 21% in the first nine months. However, the consumption rising. Other reasons include geopolitical
Nifty experienced a correction of 11.3% from its peak tensions, fluctuating inflation—particularly food inflation,
during October and November 2024. Despite the volatile high-frequency indicators in India, the US
volatility, the Nifty Midcap 150 Index and Nifty Smallcap presidential elections, and the steep valuations of Indian
250 Index outperformed the Nifty, recording gains of markets. Active primary markets, including India’s largest
around 22% and 26% respectively for CY24YTD as on IPO in the month of October, added to supply of paper
29th November 2024. and could have contributed to volatility.
The heightened volatility within the year can be attributed On the sectoral front CY24YTD belonged to Healthcare
to several factors. However, a key reason was a slowdown 38.4%, Infrastructure 32.7%, Power 28.7% and Realty
in the Indian economy in the Jul-Sep quarter which 28.7% as they were among the top performers.

Chart 3: 2023 and CY24YTD Performance of sectoral indices

79%

CY24YTD CY23
67%
57%

46%

39%
38%
37%

33%
33%

33%

29%
29%

29%

27%
27%

26%

26%
25%

25%

24%

23%

21%
19%

19%

17%
16%

13%
13%

11%
11%

9%

4%
BSE Bankex
BSE Utilities
BSE Healthcare

Infrastructure

BSE Finance
BSE Realty

BSE Capital

BSE Consumer

BSE Consumer

BSE Information
BSE Auto

BSE TECK

BSE OIL & GAS

BSE Metal
BSE Power

Consumer Goods
BSE Fast Moving
Discretionary
BSE India

Technology
Goods

Durables
Index

Source: Bloomberg, CY24YTD as on 29, November 2024

Key Trends Observed in 2024

Year of Major Elections Potential Risk and US Policy Change Impact
Many nations held elections. The outcomes have been The new regime in the US has indicated that it is likely to
consistent worldwide: incumbents have either been increase global trade tariffs. This could impact global
defeated or have received weaker mandates. growth including that of US, India and China. There could
also be an impact on US inflation and interest rate
trajectory. Slowdown in private sector capex growth in
Weaker Consumption is the Pain Point India due to global uncertainties around trade wars could
Government spending for the first 7 months of FY25 has also hurt growth in the short term.
surged, especially in agriculture, public distribution systems Other global factors influencing India’s growth include
(PDS), and rural development, with allocations rising by 30%. policy actions from China, interest rate decisions, policy
This has helped consumption in rural areas, as seen in a measures from the US, and geopolitical developments.
15% year-on-year increase in two-wheeler sales from US policy initiatives under the new President to increase
September to November. However, overall consumption oil production could help keep prices under control.
has not met expectations, with urban consumption
lagging behind.

08 Annual Outlook 2025

Domestic flows were pivotal in driving this Long-term Growth Narrative remains Intact
year's market performance Macro-stability indicators are expected to remain within a
The Indian equity market has ascended to the fourth comfortable range, offering policymakers the flexibility
largest in the world, with its market capitalization tripling needed to adjust strategies. We anticipate a supportive
to around $5 trillion over the past decade. Despite this policy shift, characterized by monetary easing and
enhanced global stature, short-term volatility may persist sustained emphasis on public capital investment.
due to foreign capital flows. These flows could be
We believe that shifts in global policies could create new
influenced by several factors, including the possibility of opportunities and reinforce the 'China + 1' supply chain
additional stimulus measures from China, key policy
strategy, benefiting India in the medium term as it stands
announcements from the new US administration, relative
out as one of the leading destinations for 'friendshoring'.
market valuations, and the outlook for the Indian Rupee.
Foreign Portfolio Investors (FPIs) acquired equities worth
INR 93,000 crore in the first nine months of CY24.
However, they offloaded equities worth INR 94,000 crore
in October 2024 and INR 17,000 crore in November
2024. Domestic Institutional Investors (DIIs) did the
heavy lifting for the year and contributed positively. FII
outflows into Indian equities stand at USD 2.1 billion,
while DII inflows into equities in CY24 YTD continue to
be strong at USD 58.9 billion.

Way Forward for Equity Markets

Valuation
India’s valuations have increased over the last three However, valuations have eased slightly from the peak in
years, with markets now focusing on earnings growth. recent months, creating bottom-up opportunities across
Valuations in some areas have been stretched as the market cap spectrum. Chart 4 indicates Nifty 1 year
significant government spending over the past few years Forward PE at 20.6x.
have helped create unrealistic growth expectations.

Chart 4: Nifty 1yr fwd consensus PE at 20.6x

Source: Bloomberg, Jefferies

Annual Outlook 2025 09

Impact on Earnings
Markets were estimating FY25 earnings growth for Nifty This slowdown is expected to be transient and could be
50 companies at around 15% at the start of the financial attributed to the elections and Government formation in
year, but it now appears that we may achieve only higher the first four months of the fiscal year. This shortfall has
single-digit earnings growth for the Nifty 50 companies impacted earnings in capex sensitive sectors. Urban
(see Chart 5). Several factors contribute to this outlook. consumption has also slowed down, possibly due to
Government spending on capital expenditure (capex) weak wage growth. For FY26, earnings growth is
has been weaker. In the first half of the year, government expected to be around 13-15%.
capex is down 15%, leaving a significant void of about
₹1.4 lakh crore compared to budget projections.

Chart 5: Nifty Consensus Earnings Growth (%)

50
40.5
40

30
18.8 17.3
20 13.7 14.7
10.5 9.6 9.6
8.2 7.3 6.5
10

-10 -7.1
-20 -13.4
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25E FY26E

Source: Bloomberg, Jefferies. Note: E - Estimates

Select Opportunities in Small and Mid-cap space

Chart 6: Small and Mid-cap performance

40%
34%34% LC MC SC
35% 32%
29% 28% 28%
30%
25%
25%
19%
20%
16% 16%16%
15%
11%
10% 7%
5%
1% 2% 1% 2%
0%
<10% 10-20% 20-30% 30-40% 40-50% 50-60%
Down from 52 week highs

Source: Bloomberg, as on 29, November 2024, LC- Large cap, MC- Midcap, SC- Small cap

10 Annual Outlook 2025

Among small-cap stocks (Stocks ranked 251-500 by Mid and small-cap stocks have greater exposure to real
market cap), 56% have declined by more than 20% from estate and industrial sectors compared to large-cap
their 52-week highs. Similarly, 47% of mid-cap stocks are stocks. Due to favorable macroeconomic factors, mid
down by over 20% from their 52-week highs. This and small caps are well-positioned to deliver superior
occurred when the mid-cap index was down 7% from its earnings growth over the next few years.
52-week high, and the small-cap 250 index had
decreased by 5%.

India is a Multi Decadal Opportunity Urban consumption names have been impacted, but we
believe this is a temporary lull before it picks up again.
The market has primarily been driven by an investment
However, the broader economic drivers of rising per
cycle rather than consumption. We firmly believe that
capita growth over the next few years suggests that this
India is on a multi-year capex cycle involving
space will continue to perform well in the medium term.
government, private, and household spending.

The expected recovery in government capex during the

second half of this fiscal year should benefit companies Opportunities for Investors
and sectors linked to the capex theme and help bring
Geopolitical uncertainty persists, and the change in the
back focus on the ongoing multiyear capex cycle in India.
regime in the US suggests that the coming months will
The real estate cycle is expected to continue its upward be particularly eventful. The recent correction has
trend in the medium term. Corporate capital expenditure improved the risk-reward of the Indian market but
is anticipated to increase over the next 2 to 3 years, valuations could require more time for a better balance
potentially leading to rise in earnings growth. This is vis-à-vis earnings.
expected to support equity markets. Additionally, new
Volatility is part and parcel of the markets. Given the
sectors are emerging within the economy including
positive long-term India story, bouts of volatility could
through digitalization and sustainability.
provide opportunity for the patient investor.

Themes we are Positive on

We remain positive on banks and the financial sector, as
where the valuations vs growth equation is favourable.
On the consumer side, we believe in the premiumization
story of the Indian markets. In the auto sector,
premiumization is evident, with rising share of SUVs
being a clear sign.

Annual Outlook 2025 11

 Fixed Income
Overview & Outlook

12 Annual Outlook 2025

Global Monetary
Policy and Outlook
Advanced Economies

Advanced economies Policy Rates (%)

United States Euro area United Kingdom Japan - RHS

6.00 0.30
5.50 0.20
5.00
0.10
4.50
0.00
4.00
3.50 -0.10

3.00 -0.20

Jul-24
May-24
Feb-24

Mar-24

Aug-24

Sep-24

Nov-24

Dec-24
Oct-24
Jan-24

Apr-24

Jun-24

Source: OECD

United States: With inflation progressing towards the 2% improved inflation outlook in its recent policy meeting. The
target and considering the uncertain economic outlook, the decisions are aimed at making borrowing less expensive
US Fed has reduced rates by 100 bps this year, bringing for firms and households, thereby stimulating consumption
them down to 4.5%. and investment, and supporting economic growth amid a
Going forward, US bond markets will be more influenced slower recovery and easing inflation pressures.
by fiscal plans, especially the challenge in executing United Kingdom: The Bank of England cumulatively
election promises like tax cuts. The concerning US fiscal reduced the Bank Rate by total 50 basis points during
outlook, with projected deficits exceeding 6%, will impact the year to 4.75% due to continued disinflation and to
future yield outcomes, depending on Federal Reserve support GDP.
actions and fiscal decisions. Bond yields, currently around
4.5%, could rise to 5.0% without fiscal expansion and Japan: It is the few advanced economies to raise rates
significantly higher with substantial expansion. by 10 basis points during the year. Expectation of
economy growing above potential, with CPI inflation rising
Euro Area: The ECB has cumulatively lowered key through 2025 are some of the reasons behind this move.
interest rates by 135 basis points during the year, citing an

Emerging Market Economies

Emerging market economies Policy Rates (%)
Brazil India Mexico South Africa
12.00

11.00

10.00

9.00

8.00

7.00

6.00
Jul-24
Mar-24

May-24

Oct-24

Nov-24

Dec-24
Jan-24

Feb-24

Jun-24

Aug-24

Sep-24
Apr-24

Source: OECD/RBI

Brazil: Disinflation halted, leading the Central Bank to earlier in the year. In its November meeting, it raised the
reverse its easing monetary policy trend established policy rate by 50 bps to 11.25%.

Annual Outlook 2025 13

Domestic Monetary
Policy and Outlook
Rate Action Stance
MPC Date Repo Rate Stance Rationale
Supported by supported by

8th Feb 24 6.50% 5:1 Withdrawal of 5:1 RBI is committed to reducing inflation to 4%
accommodation sustainably, ensuring price and financial
stability for strong, inclusive growth, and
preserving and building on India's economic
strength.

5th April 24 6.50% 5:1 Withdrawal of 5:1 Inflation is declining and GDP growth is
accommodation strong. We must remain vigilant and continue
working to ensure inflation aligns sustainably
with the target

7th June 24 6.50% 4:2 Withdrawal of 4:2 While inflation is on the right track,
accommodation challenges remain due to global geopolitical
conflicts and commodity price volatility. With
strong growth, India's monetary policy can
focus on price stability, anchoring inflation
expectations, and providing a foundation for
sustained growth.

8th Aug 24 6.50% 4:2 Withdrawal of 4:2 Inflation and growth are balanced, with stable
accommodation macroeconomic conditions. Despite progress,
supply shocks require vigilance to ensure
inflation aligns with the target, supporting
resilient growth for sustained high growth.

9th Oct 24 6.50% 5:1 Neutral 6:0 Unanimous The Indian economy is stable and strong,
with balanced inflation and growth, rising
forex reserves, fiscal consolidation, and high
global investor optimism, yet remains
vigilant.

6th Dec 24 6.50% 4:2 Neutral 6:0 Unanimous The MPC adopts a cautious approach,
awaiting clearer growth and inflation
outlooks. At this critical juncture, prudence,
practicality, and timing are crucial

Source: RBI

The last six policy meetings have seen the RBI Throughout the past six meetings, the RBI has clearly
maintaining status quo on the repo rate, reverse repo focused on its dual goal of maintaining price stability while
and marginal standing facility rate at 6.50%, 6.25% and keeping in mind the objective of growth. It has remained
6.75% respectively. However, the latest policy meeting nimble footed in its approach towards flexible inflation
saw the RBI lowering the cash reserve ratio (CRR) by 50 targeting mechanisms. During the early part of the year
basis points in two 25 basis point tranches to 4.0%. RBI appeared to be comfortable with the moderation in
Lower CRR would lead to releasing ₹1.16 lakh crore inflation and robust growth. The later half of the year has
liquidity. During the last one-year period, RBI changed seen erratic inflation prints largely an outcome of volatile,
its stance from ‘withdrawal of accommodation’ to seasonal change in food prices. The central bank remains
‘neutral’. The above decisions were taken by the mindful and wants to anchor inflation expectations. It does
changing member composition of the MPC committee not want rise in inflation due to food prices to be
and considering growth-inflation dynamics prevailing at generalized as higher inflation. It is in pursuit of this goal
that time. that the RBI has done a fine balancing act.

14 Annual Outlook 2025

Drawing an analogy from the RBI’s past statement, it festive demand and increased rural activities. Agricultural
viewed inflation during the early part of the year as an growth is supported by healthy kharif crop production
elephant in the jungle that they have been able to and better rabi sowing. Industrial activity is expected to
transform into a horse that is now brought into the stable. recover with increased government capital expenditure.
In future, food price shocks are expected to wane, and Rural demand is rising, and urban demand shows
headline inflation to ease and align with the target. A moderate growth. Government consumption and
good rabi season, supported by adequate soil moisture investment are also improving. The average projected
and reservoir levels, will be crucial for reducing food growth for the next four quarters also arrives above 7.0%.
inflation. Record kharif production should lower rice and
Real rates are in positive territory, inflation has exhibited
tur dal prices, and vegetable prices may see a seasonal
intermittent rise and GDP growth trajectory showed signs
winter correction.
of improvement. Risk emanating from global tariffs, US
However, domestic edible oil prices need monitoring and fiscal policies, China's spending, and geopolitical risks
so do rising costs reported by manufacturing and will influence India's rate cut timing and depth. We
services firms. Considering these factors, CPI inflation expect a shallow rate cycle domestically, and it could
for 2024-25 is projected upwards by 30 bps from the last only begin somewhere in the next calendar year.
policy meeting at 4.8%. It would return to the RBI’s target
From the yield curve perspective, lower spreads as
of 4.0% in Q2FY26.
compared to historical averages for similar credit paper
As far as GDP growth is concerned, the past three fiscal does not encourage us to add duration to our fixed
years has seen growth above 7.0%. The latest projected income portfolios. We will stay nimble footed in our
growth for FY25 is lowered to 6.6% largely due to lower- approach to add duration to our portfolios as and when it
than-expected GDP growth of 5.4% in Q2FY25. is remunerative and the interest rate direction is certain.
Tempered growth can be attributed to general elections For short term tenure of less than one year, liquidity
during April – June 2024, slowing down the overall dynamics would dictate the yields and we are prepared
economic activity. The lower growth in our assessment is to deploy cash to take the benefit of spike in yields due to
an aberration. Recent high-frequency indicators suggest demand supply situation.
that the economy has since recovered, driven by strong

Annual Outlook 2025 15

 Mutual Fund Industry
Overview & Outlook

16 Annual Outlook 2025

Key Trends in the Mutual
Fund Industry in 2024
AUM Trend

Monthly Net AUM Trend

68.1
67.3
67.1
66.7
65.0
70 46%
44% 44%
43%

61.2
44%

58.9
57.3

60 40% 42%
54.5

53.4
52.7

39% 40%
38% 38%
38%
50 36% 38%
35%

49
36%

47
47

47
46
33% 44
43

40 34%
42
40

39

39

32%

30 30%

2024 2023 YoY Growth (RHS)

Note: AUM in Rs Lakh Crore. Source: AMFI

The year gone by had many domestic and global factors 50-basis points rate cut followed by two rate cuts of 25
contributing to market uncertainties. The year began in basis points each in November and December.
an environment of elevated interest rates in developed Escalating geo-political concerns also contributed to
economies like the U.S and uncertainties surrounding the market uncertainties. India’s economic growth witnessed
start of the rate easing cycle of the US Federal Reserve. a slowdown during the September quarter which led
The RBI in India continued to remain watchful of inflation Foreign Institutional Investors to turn net sellers in India
trends and kept policy rates elevated. This was also a and re-allocate to other global markets.
year when the largest democracy in the world, India and
Despite these headwinds, investor confidence in mutual
the oldest democracy in the world, United States held
funds as a vehicle for wealth creation has remained
elections to choose their political leadership.
steadfast. The year 2024 has seen mutual funds industry
The Bank of Japan made a major policy shift by raising assets touch new all-time highs in most months of the
interest rates in March which eventually triggered the year. The industry has recorded a healthy pace of growth
unwinding of Yen carry trades across the world. The US over the previous year with rising investor awareness
Fed began its policy easing cycle in September with a about mutual funds.

Annual Outlook 2025 17

 Asset Wise % of Total AUM

14% 14% 14% 14% 14% 14% 14% 14% 14% 14% 14%

59% 59% 61% 60% 59% 62% 62% 61% 63% 61% 61%

17% 17% 17% 17% 16% 16% 16% 17%

17% 16% 16%

10% 11% 8% 10% 10% 8% 9% 9% 8% 9% 9%

Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24
Liquid/ Overnight Debt Equity Hybrid
Source: AMFI

In terms of asset classes, equity has remained the share of equity in the industry assets has grown from
dominant asset class contributing to industry assets. The 59% in the beginning of 2024 to 61% by November 2024.

Category Wise Flows

Amount in Rs Lakh Crore

Total Gross Flows for 2024 Total Net Flows for 2024
Equity Funds
(Jan to Nov 2024) (Jan to Nov 2024)

Multi Cap Fund 0.58 0.38

Large Cap Fund 0.64 0.17

Large & Mid Cap Fund 0.63 0.36

Mid Cap Fund 0.75 0.29

Small Cap Fund 0.77 0.30

Dividend Yield Fund 0.10 0.06

Value Fund/Contra Fund 0.40 0.21

Focused Fund 0.23 -0.01

Sectoral/Thematic Funds 2.15 1.40

ELSS 0.25 0.02

Flexi Cap Fund 0.84 0.36

Total 7.33 3.53

Source: AMFI Note: Top three categories by flows highlighted in green. Bottom three categories by flows highlighted in red.

Among equity categories, the year has seen highest to witness net outflows during the year. Overall, equity
gross and net flows into sector and thematic funds. net flows were Rs.3.53 lakh crores during the year up to
These were followed by Multi cap and flexi cap funds in November 2024 vs Rs 1.44 lakh crores in the year ago
terms of net flows. Focused funds were the only category period.

18 Annual Outlook 2025

Amount in Rs Lakh Crore

Total Gross Flow for 2024 Total Net Flows for 2024
Fixed Income Funds
(Jan to Nov 2024) (Jan to Nov 2024)

Overnight Fund 50.81 0.15

Liquid Fund 41.48 1.16

Ultra Short Duration Fund 2.49 0.17

Low Duration Fund 1.62 0.14

Money Market Fund 6.00 0.97

Short Duration Fund 0.52 0.06

Medium Duration Fund 0.04 -0.03

Medium to Long Duration Fund 0.02 0.003

Long Duration Fund 0.10 0.08

Dynamic Bond Fund 0.10 0.02

Corporate Bond Fund 0.66 0.19

Credit Risk Fund 0.01 -0.04

Banking and PSU Fund 0.17 -0.07

Gilt Fund 0.28 0.13

Gilt Fund with 10 year constant duration 0.02 0.002

Floater Fund 0.21 -0.06

Total 104.52 2.88

Source: AMFI Note: Top three categories by flows highlighted in green. Bottom three categories by flows highlighted in red.

Among debt categories, the year has seen highest net net outflows among debt categories. Overall net flows
flows into liquid funds followed by money market funds into fixed income funds was Rs 2.88 lakh crores during
and corporate bond funds. Banking and PSU funds, the year up to November 2024 vs Rs 29,468 crores in
floater funds and credit risk funds witnessed the highest the year ago period.

Annual Outlook 2025 19

Amount in Rs Lakh Crore

Total Gross Flow for 2024 Total Net Flows for 2024
Hybrid Funds
(Jan to Nov 2024) (Jan to Nov 2024)

Conservative Hybrid Fund 0.05 -0.003

Balanced Hybrid Fund/Aggressive Hybrid Fund 0.32 0.04

Dynamic Asset Allocation/Balanced Advantage Fund 0.58 0.18

Multi Asset Allocation Fund 0.51 0.40

Arbitrage Fund 2.62 0.68

Equity Savings Fund 0.29 0.14

Total 4.37 1.44

Source: AMFI Note: Top three categories by flows highlighted in green. Bottom three categories by flows highlighted in red.

Among hybrid categories, Arbitrage funds had the into hybrid categories were Rs 1.44 lakh crores during
highest gross and net flows during the year. These were the year up to November 2024 vs Rs 78,199 crores in
followed by Multi Asset Allocation Funds and Balanced the year ago period.
Advantage Funds in terms of net flows. Overall net flows

Widening Investor Base

The year has seen number of mutual fund investors twice the number of investors added in the same period
touching a new all time high in every month up to in 2023. At the end of November 2024, the industry had
November 2024. Between January to November 2024, 5.18 crore investors.
the industry added over 88 lakh investors which was

Growing Investor Base of Mutual Funds

5.50 27%
25%
25%
24% 25%
5.18

5.00
5.10

23%
5.01

23%
4.91

23%
4.81

22%
4.69

4.50
4.60

20%
4.53
4.46

21%
4.39

19%
4.30

4.00
4.14
4.09

18% 18%
4.04
3.98

16% 19%
3.92
3.83
3.82
3.79
3.77
3.73
3.70

3.50
17%

3.00 15%

2024 2023 YoY Growth (RHS)

Source: AMFI. Number of unique mutual fund investors in crores.

20 Annual Outlook 2025

Rising SIP Flows Amid Market Volatility
With growing number of investors, the industry has also Growing SIP flows have continued to support the equity
seen growth in monthly SIP flows. The SIP flows in every market during periods of foreign investor outflows.
month of 2024 have been higher than the year ago period. Growth in monthly SIP flows amid market uncertainties
Monthly SIP flows between January to November 2024 and volatility is a testament to investor confidence in
have increased from Rs 18,838 crore to Rs 25,320 crores mutual funds and their commitment to long term investing.
which is a growth of 34%. This is higher than the growth of
23% during the year ago period when monthly SIP flows
increased from Rs 13,856 crores to Rs 17,073 crores.

Monthly SIP Flow Trend

28,000 53% 53% 55%

26,000 50% 48%
48% 49%
24,000 50%

22,000 44%
42%
45%
20,000 40%

25,323

25,320
24,509
18,000
23,547
23,332

35% 40%
21,262

36%
20,904
20,371

16,000
19,271
19,187
18,838

15,814

16,042
14,000
14,749

15,245
13,686

35%
14,734
13,856

16,928

17,073
14,276

13,728

12,000
10,000 30%

2024 2023 YoY Growth (RHS)

Source: AMFI. SIP flows in Rs crores.

Way Forward
Taking cues from the year gone by, the way ahead for from about one fourth of bank deposits in the year ago
the industry looks promising. Growing awareness about period. However, in developed markets like the U.S,
mutual funds combined with ease of access using mutual fund industry assets are more than twice the size
technology would continue to help widen the investor of bank deposits. This represents the growth potential for
base. As more and more investors take the mutual funds the mutual funds industry in India.
route to meet their financial goals, the industry could see
In 2025, with a new U.S President taking office in
growth in assets and monthly SIP flows. The industry has
January, the markets could face volatility. The RBI may
5.18 crore investors which is a small portion of the
pivot to a policy easing cycle in 2025 while remaining
overall population of over 140 crores. This presents a
watchful on inflation. Geo-political developments would
multi decade growth opportunity for the mutual funds
continue to influence global markets during the year.
industry in India.
Despite short term volatility, investors should adhere to
When compared to the quantum of bank deposits in the their asset allocation strategies in line with their risk
country, mutual fund industry assets have grown to about appetite and continue investing for their long-term goals.
a third of bank deposits at the end of November 2024

Annual Outlook 2025 21

Notes

22 Annual Outlook 2025

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