Mumbai, Dec 19 (PTI) After a multi-year bull run, there is a need for equity investors to moderate their return expectations in 2025, a domestic brokerage said on Thursday.

NSE's 50-share benchmark is expected to be at 26,482 points at the end of 2025, which is an over 10 per cent jump from Thursday's close of 23,951.70 points, HDFC Securities said.

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Its managing director and chief executive Dhiraj Relli said equities will outperform any other asset class in 2025, and the long-term India story is also intact.

"For many years now, the markets have given high returns. In the new year, investors will have to moderate their expectations," Relli said.

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The Nifty benchmark has risen by 10.22 per cent year-to-date in 2024, which has been characterized by some selling towards the end of the year on exits from foreign portfolio investors as they saw better returns in other markets amid a growth slowdown to a seven-quarter low in India.

Relli said a majority of the investors in the market are ones, who have entered post-2020 and have never seen a sharp correction in their investment journey, which will make it essential to set expectations accordingly.

The brokerage will advise investors to bet on large caps rather than the mid and small caps, which have rallied handsomely in the last few years, he said, adding that over 67 per cent of the allocation should be to the bigger companies, which have seen multiple business cycles.

The remaining allocation can be to the small and mid-cap ones, he said, adding that the same has to be done on a very selective basis on an entity level.

A senior official remarked that in the last two to three years, about 80 per cent of the small and mid-cap stocks delivered positive returns for shareholders, and the same will reverse to just 20 per cent of the scrips delivering profits in the new year.

Relli said the FPIs will return only when they see earnings growth in Indian companies, which will happen in the second half of the next year.

The brokerage expects earnings growth to increase to 17 per cent in FY26 from the 4 per cent it is estimating for FY25, he added.

Unmesh Sharma, the head of institutional equities, said the GDP growth slowdown in India is bad news and added that given this background, the government will keep the public capex high if not at the same growth levels as the 11 per cent higher budgeted for FY25.

India is going through a mild cyclical slowdown, which will last for 6-9 months, but is structurally geared for growth going ahead, its head of institutional research Varun Lohchab said, adding that the house is positive on large banks, top IT companies, capital goods, cement and building materials, and negative on auto, consumer staples, small finance banks and NBFC sectors.

Lohchab said consumption has not fallen off a cliff in India, but there is no V-shaped recovery in the segment which makes it have a negative view on the sector.

Meanwhile, Relli said the firm, which closed FY24 with a post-tax net of Rs 945 crore, is confident of increasing the bottom line to over Rs 1,100 crore in FY25.

There are no plans to list the subsidiary of largest private sector lender HDFC Bank, he said, adding that the return on capital is very high, and it was also able to raise required capital through a rights issue earlier this year.

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