GR Exclusive: "Sensex May Witness A Dead-Cat Bounce Soon"– Rahul Ghose, CEO Hedged.in, on Stock Market Trends

The stock market experienced major turbulence in early 2025, with the Sensex and Nifty facing selling pressure and falling 5% so far this year. Foreign institutional investors (FIIs) are pulling out large sums, and global economic uncertainties are weighing on investor sentiment. Amidst these challenges, GoodReturns sat down for an exclusive conversation with Rahul Ghose, CEO of Hedged.in, to gain insights into the current market condition and sectoral opportunities. Ghose shares his outlook on the performance of Sensex and Nifty in the coming months, the key factors shaping market sentiment, and the sectors that are poised to outperform in spite of the ongoing volatility in the stock Market

Below are key highlights from our exclusive conversation with Rahul Ghose, CEO of Hedged.in

1. How do you see the performance of Sensex and Nifty in the coming months?

After a period of sustained selling pressure, the indices have reached oversold levels, making a temporary bounce-back a likely scenario. However, on both the daily and weekly time frames, the lower highs and lower lows structure remains intact, signaling a continued downtrend trend or at least a time correction.

There is a high probability that Nifty and Sensex may witness a dead-cat bounce in the coming weeks, which could attract selling pressure at higher levels. Nifty faces strong resistance in the 23,200-23,800 zone, while for Sensex, the key resistance lies between 77,756 and 78,735. This suggests that Nifty could see an 800-1,000 point recovery in the short term, but this should not be mistaken for the beginning of a fresh rally.

According to Dow Theory, a trend reversal would only be confirmed if Nifty breaks above its previous lower high at 23,807. Until then, the broader market structure remains weak, and traders should remain cautious.

2. What are the key factors driving the current market sentiment?

The current market sentiment is influenced by several factors:

• Foreign Institutional Investor (FII) Outflows: In the first two months of 2025, FIIs have withdrawn approximately ₹1.12 lakh crore from Indian equities, exerting downward pressure on the markets.

• Economic Indicators: Persistent high inflation and sluggish income growth have dampened consumer spending and corporate earnings, contributing to a cautious market outlook.

• Global Trade Tensions: Uncertainties surrounding international trade policies, particularly recent tariff announcements by the U.S., have heightened market volatility.

3. Which sectors do you think will outperform in the near future?

The IT sector as well as the consumer durable sector looks comparatively stronger on charts. Both the indices have taken a support around the monthly 20 EMA. Previous corrections from the tops to such averages have resulted in the indices making new highs. Not all IT stocks, but select mid-cap IT stocks like Bsoft and Coforge, surely look promising. Despite recent corrections, the IT sector has shown resilience, with companies like Coforge securing significant deals, indicating robust demand for digital services.

Another sector that looks promising is Consumer Durables. The Union Budget 2025 has introduced tax incentives and policy support that are likely to boost consumer demand in this space. Rising disposable incomes, urbanization, and increasing penetration of premium home appliances are also key drivers.

Voltas is well-positioned to benefit from strong summer demand, robust AC penetration in tier-2 and tier-3 cities, and a revival in the real estate sector.

Apart from Voltas, Havells India is another strong player in this sector. The company has a well-diversified portfolio in electrical goods, strong brand recognition, and is seeing steady growth in its Lloyd consumer electronics segment. Its focus on premiumization and expanding distribution reach makes it an attractive bet in the current market. Havells looks attractive after the recent steep correction.

4. Are there any sectors that investors should be cautious about in 2025?

Investors should exercise caution in the following sectors:

Small-Cap Stocks: The small-cap segment has experienced significant declines, with some stocks losing over 55% in 2025, indicating heightened volatility and risk. Worse, some of the stocks still look expensive if one looks at the PE ratios!

Industries Highly Sensitive to Trade Policies: Sectors heavily reliant on international trade may face challenges due to ongoing global trade tensions and tariff uncertainties. For instance, the pharmaceutical sector has been highly volatile, reacting to global trade policies. Recent announcements by Donald Trump on tariffs and trade restrictions have particularly impacted Indian pharma exports to the U.S., leading to sharp price movements. Investors should focus on companies with strong domestic demand and diversified global exposure to mitigate these risks.

5. What investment strategies would you recommend for retail investors in the current market scenario?

Retail investors might consider the following strategies:

Diversification: Spread investments across various sectors and asset classes to mitigate risk.

Focus on Quality: Prioritize fundamentally strong companies with robust balance sheets and consistent earnings. When market sentiment improves, stocks with strong earnings tend to lead the rally.

Long-Term Perspective: Maintain a long-term investment horizon to navigate short-term market volatility.

Ignoring the noise: One key strategy is to ignore the noise and stay focused on fundamentals. Think of market corrections like an e-commerce sale-just as you would seize the opportunity to buy your favorite brand at a 50% discount, consider accumulating quality stocks when valuations turn attractive. Retail investors often wait for a correction when markets are at new highs, but when the correction actually happens, fear takes over, and they hesitate to buy-only to regret it later. Avoid falling into this cycle and stay disciplined in your investment approach.

6. How do you see foreign institutional investor (FII) participation in Indian equities this year?

FII participation has been notably negative, with outflows reaching ₹1.12 lakh crore in the first two months of 2025. This trend reflects concerns over valuations, corporate earnings, and global economic conditions. FIIs have been net sellers in early 2025, driven by global risk-off sentiment, higher U.S. bond yields, and a strengthening dollar. Additionally, they face a double impact when investing in India-a decline in stock prices coupled with a weakening rupee, which erodes their returns. This has been a key factor behind recent FII outflows from Indian equities. However, stabilization in currency and global interest rate trends could lead to a revival in FII participation.

7. What are the biggest risks to the Indian stock market in 2025?

Continued FII Outflows: Sustained foreign investor selling could further depress market levels.

Global Economic Slowdown: A deceleration in global growth may adversely affect export-oriented sectors.

Domestic Inflation: Persistent inflation could erode consumer purchasing power and corporate profit margins.

8. How do global geopolitical tensions impact Indian markets?

Geopolitical tensions can lead to increased market volatility, capital outflows, and disruptions in trade. Rising tensions in the Middle East could push up crude oil prices, increasing India's import bill and fueling inflationary pressures. Additionally, ongoing U.S.-China trade conflicts and recent tariff policies by the Trump administration have impacted global supply chains, indirectly affecting Indian exporters. Any escalation in Russia-Ukraine tensions could further disrupt commodity prices, impacting key industries like metals and fertilizers. Investors should monitor these developments closely, as they can influence market sentiment and economic growth.

9. Do you expect a strong IPO pipeline in 2025?

The IPO pipeline for 2025 appears robust, with several high-profile companies preparing to go public. Notably, Tata Capital is planning a substantial IPO estimated at $11 billion, which could be one of the largest listings of the year. Additionally, companies like HDB Financials, LG Electronics India, and Lenskart have significant IPOs in the pipeline, each aiming to raise over ₹10,000 crore. However, market volatility has led some companies to postpone their IPOs. For instance, Avanse Financial Services and Manjushree Technopack have delayed their public offerings despite receiving regulatory approval in late 2024.

This cautious approach reflects the current market sentiment, but the overall outlook for IPO activity remains optimistic as conditions stabilize.

10. What trends do you see in the primary market?

As mentioned above, the primary market is likely to witness cautious activity, with companies reassessing fundraising plans amid market uncertainties and investors exhibiting selective participation based on issuer fundamentals. On the whole, I expect 2025 to be a lackluster year with more sideways swings than a trending market. We see the top this year at 27200.