Indian stock market: Lessons for investors from 2024 and risks ahead for 2025

The Indian equity markets showcased resilience for most of 2024, weathering significant challenges such as persistent inflation, subdued Q2FY25 earnings, foreign institutional investor (FII) outflows, geopolitical uncertainties, and the general election outcome.

The Nifty 50 and Sensex have delivered returns of over 9 per cent and 8.5 per cent, respectively, so far this year. However, the broader market stole the spotlight, with the Nifty Midcap 100 and Nifty Smallcap 100 indices posting impressive gains of 25 per cent each.

Despite these achievements, the last quarter of the current year turned out to be difficult, as Nifty witnessed a correction of 6.2 per cent in October, 0.3 per cent in November, and 1.6 per cent in December (to date).

The stock market’s journey in 2024 offers valuable insights for investors, while 2025 presents new opportunities and risks that require careful navigation. Here are some lessons for investors from 2024, as per experts.

Lessons from 2024

1. Patience is Crucial

After rallying to new highs in September, the domestic market experienced a sharp downtrend in October and November, led by heavy FII selling, reminding investors that the stock market is a two-sided game. Trivesh D, COO, Tradejini said this rollercoaster ride emphasises the importance of patience and the need to stay calm during turbulent times. 

2. Diversification Protects Portfolios

Geopolitical tensions and economic uncertainties in 2024 reinforced the value of diversification. Ravi Singh, SVP – Retail Research, Religare Broking said, “Investors who spread their investments across asset classes and sectors were better positioned to withstand market volatility. A disciplined, long-term approach proved to be a vital tool in navigating challenges and seizing opportunities.”

3. Focus on Fundamentals

The stock market fluctuations in 2024 reminded investors about the importance of investing in fundamentally sound companies. Divam Sharma, Founder and Fund Manager, Green Portfolio PMS said that even during flash crashes, businesses with strong fundamentals maintained their value, offering a safe haven for patient investors. 

4. Resilience is Key to Success

Across the board, 2024 showed that market volatility is inevitable. However, the ability to stay resilient and adapt to changing circumstances helped seasoned investors outperform. 

Sharma emphasised the importance of staying committed to your investments, especially during turbulent times and having the discipline to focus on long-term growth. 

Trivesh D also highlighted that thorough research and disciplined investing are key to long-term success as they can help investors prepare for both bullish and bearish phases.

Challenges and Risks for 2025

Analysts also highlighted several risks that await investors in the year ahead:

1. High Valuations

Trivesh D anticipates continued market growth in 2025, albeit with intermittent corrections due to elevated valuations. A “Buy on Dip” strategy focusing on fundamentally robust stocks could help investors capitalise on these corrections while building long-term portfolios, he said.

2. Geopolitical and Economic Risks

Ravi Singh highlighted ongoing geopolitical tensions and unresolved economic challenges as critical risks for 2025. The stock market’s ability to sustain higher levels will largely depend on the resolution of these issues. Positive developments could act as catalysts, while lingering uncertainties may dampen investor sentiment.

3. Sectoral Headwinds

Divam Sharma cautioned against potential challenges in sectors like IT and pharmaceuticals due to US policy shifts. For instance, the new administration’s stance on tariffs and regulations could significantly impact these industries, necessitating close monitoring by investors.

4. Global Factors at Play

Shifts in global interest rates and commodity prices will also influence market performance. Keeping abreast of these changes will be crucial for investors to adjust their strategies effectively, suggested experts.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.