Publication date: June 26, 2025
image_here
India's economy has been showing nice growth rates ranging between 6.5% and 9.6% per year since 2021. Similar growth rates are expected by analysts for 2025 and for the next five years as well.
Investors have already pre-empted the expected growth which is why India's stock index has performed great in recent years. In this article, we will explore whether it is interesting to jump on this moving train or whether we should leave investing in this special country for a while.
India's economy: a brief introduction
After independence in 1947, it took until 1991 for India to change its economic course by passing numerous liberalization and privatization laws. Since then, the economy has grown steadily. Services grew explosively, while industry was relatively slow to take off. As of 2023, India is the most populous country in the world with an estimated population of 1.44 billion people. Just slightly more than China. Moreover, 50% of the population is under the age of 25. Together they provide a nice economic growth that is expected to reach 6.5% to possibly 7% this year. For comparison, the expected growth of the Gross Domestic Product in the Netherlands is between 1% and 1.9%. In addition, India is experiencing a modest annual inflation rate of 2.8%. The combination of strong growth and modest inflation is highly desirable for a country's economy. Meanwhile, India is the fourth-largest economy in the world.
To sum up: India is currently a growth champion with strong domestic demand, reform drive and strong institutional efforts. The challenge lies in consolidating this growth through structural reforms, industrialization and trade. With the right balance of stimulus, investment, sustainability and international cooperation, India has the potential to become a true global economic power in the coming decades.
How is India's stock market performing?
When the economy has been performing well for years and expectations are high, you usually see that reflected in strong stock market performance. Below is the chart of India's stock index Nifty 50 over the past five years. You can see that the Nifty 50 has risen 154% in five years. For comparison, you will find in purple the S&P500 (+98%) and in red the AEX (+63%).
What is the expectation of the Indian stock index according to the major international banks?
Currently, the Nifty 50 is at a level of 25,200 points. Fundamental analysts generally talk of a conservative scenario with upside potential:
Stock market analysts everywhere point to structural growth drivers such as consumer recovery, government investment, energy and infrastructure. One sees risk in high valuations (P/E ~23 - 23.5), geopolitical tensions and delayed inflows from foreign investors.
What is our expectation of the Indian stock index Nifty 50?
As far as we are concerned, the propelling Indian train has not yet reached the terminus either. However, we should be aware that the best part of the ride is behind us and the expectation and valuation is very high.
Based on our model’s most probable scenario, we project a price target of 31,500 (+23%) for the Nifty 50 over the next 12 months. This outlook is in line with the perspective of Morgan Stanley.
Conclusion
Expectations of India's economy are high and the market has already performed exceptionally over the past five years. India has the potential to continue growing at the pace expected.
Upon the realization of expectations, the market will make one last strong upward move for now that will lead to 31,500. Given the pressure, there is a possibility that the market may have to go through another correction. You may therefore, consider building up your investment by taking 50% in position now and expanding at the breakout above 26,300 or at 21,000 if the latter level is reached earlier. Price target 31,500.
Investing in India's stock market can be done in several ways but the ETF is the simplest and cheapest.
Some popular India ETFs are:
Please note that we have no interest in the above products and are only an example. Research for yourself which ETF suits you best, or consult with your advisor.
Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.