Investing in 2025: ICICIDirect's Pankaj Pandey betting on 4 big themes this year

ICICIDirect’s Research Head Pankaj Pandey who has set a target of 94,300 for Sensex in 2025, is betting on four big themes - capex and infrastructure development, premiumisation and electrification, financialization and CRDMO.

Edited excerpts from a chat on investing in 2025:

The market's mood from bullish to bearish changes very quickly as we saw during the peak in September-end and then the rally which followed from the November lows. At this stage, how bullish or bearish are you?
We are constructive on markets and believe the recent correction offers a good entry point to start accumulation for long term wealth generation. With modest ~7% growth expectations in Nifty earnings for FY25E (on a high base), we expect Nifty to resume its double-digit earnings growth trajectory with earnings over FY25-27E expected to grow at a CAGR of 15%. Earnings growth enablers would be pick-up in domestic GDP growth rate, decline in interest rates and continued growth supportive policy framework.


However, the focus going forward should be to invest in companies with certainty of growth longevity, healthy balance sheets, less susceptible to foreign shocks, capital efficient business models
Sensex and Nifty ended in the positive for the ninth year in a row despite all the negative impact of geopolitical troubles, weak earnings in H1FY25 and fractured mandate in Lok Sabha elections. Would you expect double-digit gains in 2025?


Our fair value for Nifty is pegged at 28,300 wherein we have valued the index at 21x PE on FY27E. Our Sensex target is pegged at 94,300. We see a healthy double-digit upside in broader markets in CY25. Thus, we do expect a healthy double-digit gain in 2025.

A lot of investors have already tweaked their portfolio amid signals that the government's capex spend is picking up and that the Q3 earnings season will surprise on the upside. Do you predict earnings recovery in the new year?

With a high base and volatile macro-economic environment, Nifty earnings is seen moderating in FY25E thereby growing modest 7% YoY. Going forward, however, with pick up in capex spend, both public & private, we expect Nifty to resume its double-digit earnings growth trajectory with earnings over FY25-27E expected to grow at a CAGR of 15%.

Earnings growth enablers would be healthy domestic GDP growth rate, decline in interest rates and stable policy framework

After the Maharashtra election results there was a fresh wave of buying in capex related themes and PSU stocks. Do you think that PSUs and capex themes will once again shine in 2025?
H1FY25 capex trends have been slow but the same has picked up pace since September 2024. We expect the government to reach 93% of the capex target of ₹ 10.3 lakh crore in FY25. Even in the 2019-20 election cycle capex was hit during the polling phase and subsequent periods saw strong rebound in the capex spend. We expect the same pattern to play out in H2FY25/CY25.

With lesser fervour of election in CY25, we expect the state governments to step up the capex cycle in their respective states mainly in the area of renewables, Power T&D, transportation, water etc.


New year is also the time for making new beginnings. If one were to start afresh with Rs 10 lakh capital in hand, how would you suggest someone with a moderate risk appetite to go about it? What should be the asset allocation profile?
Given the current backdrop, Asset allocation for someone with a moderate risk appetite could be 50% Equity, 40% Debt and 10% Gold. Furthermore, at every 5% fall in Nifty, around 10% may be shifted from Debt to Equity till equity reaches 70%.

Which are the top themes that you are bullish on for 2025 and why?
Some of the key big themes such as (i) capex and infrastructure development; (ii) premiumisation and Electrification; (iii) financialization and (iv) Indian CRDMO players gearing up for global opportunities.

We believe that there is a long runway of capex potential overall given the government focus as well as healthy balance sheets on the private front. Consumption led premiumisation is also likely to be a decadal theme be it in Auto, Hotels, or any other consumption discretionary led by increasing per capita income. Similarly, For CRDMO space, key catalysts are a) Possible opportunities emerging due to impending vacuum on account of Novo Nordisk’s acquisition of second largest global CRDMO player Catalent. b) Likely improvement in the US biotech funding scenario and c) Continuation of calibrated China rebalancing drive (irrespective of passage of Biosecure Act). Given the product launches and progress on charging infrastructure, Electrification is a decadal theme with tailwind in 2025 also likely.


What are the key risk factors that can derail the bull run we are in currently as every dip is being bought?
As we embark on CY25, the backdrop is volatile with inward looking policy expectations from the new government in US as well as unresolved geo-political issues and muted global growth expectations. We would closely monitor these factors and that implications as the year passes by as aggravation of the same would remain a key risk for the market.