Equity Monthly for December 2025

Markets continued the rising trend in October with Sensex gaining 2.2%. BSE mid and small cap indices rose by 0.5% and -3.3% respectively. On the global front, the US (S&P 500 Index) was flat, driven by concerns of increasing AI capex with no profitability in sight. Rally in Emerging Market Index took a breather by MSCI EM correcting by -1.8%.

Source: Bloomberg

Some of the key developments during the month were:

• Quarterly earnings season is progressing on expected lines, with a marginal pickup in growth trends.
• Possibility of a US-India trade deal. This would improve India’s export competitiveness. In the interim, Indian government has announced schemes to support exporters.
• Real GDP growth for the quarter coming at 8.2% was driven by a benign deflator. Other economic indicators such as credit growth, vehicle sales and employment showing signs of improvement.

Table 1: Performance of Major Indices during the Month

Source: Bloomberg, Data as of 30^th November 2025
Past performance may or may not be sustained in the future.

Most of the recent sectoral gains corroborate with the recent quarterly results. Key sectoral trends in the recent earning season are:

• Auto sector witnessed strong uptick in retail demand driven by GST cuts and festive spends. This trend was more prevalent in volumes exposed to mass consumption such as entry level 2-Wheeler and Passenger Vehicles. Sub-segments such as Tractors have also witnessed decent traction.
• Overall credit growth has improved for the system with unsecured book showing signs of stabilization. Credit costs are under control for most of the banks. Unless there are further rate cuts the margin trajectory could see an improvement.
• IT Services exhibited signs of stabilizing growth during the quarter, with margins remaining largely stable. Verticals such as Financial Services business have supported growth for Teir 1 IT companies. However, pure-play Engineering Research & Development companies continue to remain under pressure with weak demand. Concentration in select sectors is leading to weak performance.
• Insurance companies were negatively affected by GST cuts in the near term, as it led to postponement of demand anticipating the tax cuts. For pockets such as general insurance, we anticipate the industry headwinds to abate as claim ratio is stabilizing, growth is expected to come back driven on lower cost and improvement in OpEx (operating expenses).
• FMCG companies continue to see channel inventory rationalization post the GST implementation, resulting in weak profitability.

The flows into equities remained resilient with major contribution from DII. (DII: Domestic Institutional Investors; YTD Flows: Foreign Portfolio Investors: - $ 16 bn (Outflow); DII: + $ 81 bn).

Table 2: Current Vs Historic Valuations of major indices

Source: Bloomberg; P/E: Price to Earnings; P/B: Price to Book; Data as of 30^th November 2025
Past performance may or may not be sustained in the future.

While the near-term economic trend is gradually recovering; valuations appear reasonable in pockets within the large cap space (Refer Table 2). The recent interest rate cuts, benign inflation, good monsoon and potential consumption boost from tax cuts and GST rationalization augurs well for the economy over the medium term. While current valuation levels may not very cheap, risk reward appears reasonable for a long-term investor.

Above article is authored by Quantum.

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