2025 - Letter to Clients

 

    2025 was clearly the year of the precious Metals. Both Gold and Silver gave such stunning returns especially in the latter half of the year that investors were just left awestruck by the movement in prices of these two metals. Gold has now been the top annual performer in five of the past ten years, across asset classes. In the Indian context, the past year was a testament to the growing maturity and inherent strength of India's financial ecosystem, marked by a fascinating tug-of-war between global headwinds and domestic resilience.

India Markets

Here is how the various asset classes in India have performed in the past decade

    2025 was the year when the Nifty and Sensex gave positive returns for the tenth consecutive year. The broader market also gave positive returns, although in single digits. Smallcaps however got dragged down and gave negative returns during the year. Although the Midcap index also gave positive returns during the year, many midcap stocks followed smallcap stocks by being in negative territory during the year. 

    A defining narrative of 2025 was the stark contrast in institutional flows. Foreign Institutional Investors (FIIs) were net sellers to the tune of over Rs1.5 lakh crore, pulling money out amid global uncertainties. However, this was more than countered by a tidal wave of domestic money. Domestic Institutional Investors (DIIs) poured in a staggering Rs5.65 lakh crore, supported by record-breaking retail participation, particularly from non-metro regions. This domestic liquidity acted as a formidable shield against global shocks.

    The year had its clear winners. The PSU Bank sector was the undisputed champion, soaring over 28-30%. Other sectors like Metals and Auto also delivered strong double-digit returns, outshining the broader market. The BankNifty index was another standout performer. However, in summary 2025 was a spectacular year for precious metals, with both Gold and Silver significantly outperforming equities, and acting as a safe haven for investors. The primary market also saw a flurry of IPOs during 2025, some of them being already well known names.

    A major morale booster for the markets was the decisive action on monetary policy. With retail inflation moderating to record lows, the Reserve Bank of India (RBI) embarked on a rate-cut cycle, reducing the repo rate by a cumulative 125 basis points throughout the year. This easing of repo rate coupled with rate cuts by the US Fed, injected confidence in the markets.

    

    The continuous injection of liquidity in the markets via lowering of interest rates by the RBI is bound to stimulate credit growth leading to revival of the capex cycle, demand in jobs as well as demand in consumption. Many investors who entered the stock markets in 2024 and are still seeing red in their folio – they can expect to see some relief in 2026.

What to expect in 2026

    

    The consensus view suggests a double-digit growth year in 2026 once again. The primary catalyst for this is expected to be a robust recovery in corporate earnings. The lower interest rate environment inherited from 2025 is expected to start paying dividends in 2026. Cheaper credit is likely to boost demand in rate-sensitive sectors like housing and automobiles. Furthermore, expectations of pro-consumption government reforms, including potential GST restructuring and income tax relief, could put more money in consumers' pockets. After a period of distress, the rural economy is also showing signs of a turnaround, aided by good monsoons and government stimulus. A revival in rural demand is seen as a key theme that could drive growth across several sectors. Finally, a major potential trigger for an outsized rally would be the return of foreign investors. While FII flows remain dependent on global factors like US interest rate cycles and geopolitical stability, India's strong growth story could eventually lure foreign capital back.

    There are some risks to the above scenario. Geopolitical tensions and tariff wars could continue to create market turbulence. Certain pockets of the market, particularly in the small and mid-cap space, may face a correction if earnings don't keep pace with valuations. Finally A sharper-than-expected slowdown in major global economies could dampen sentiment and impact export-oriented sectors.

USA Markets

    The US stock market during 2025 was defined by extreme volatility, record-breaking highs, and a tug-of-war between aggressive trade policies and a massive artificial intelligence (AI) investment boom. Despite a major "flash crash" in the spring, the market ended the year with strong double-digit gains, marking its third consecutive year of growth.

    Here is how the various asset classes in USA have performed in the past seven years

    The Trump administration announced sweeping tariffs (including a 10% baseline and much higher rates for China), at the start of April 2025 triggering the largest global market decline since the 2020 pandemic. The S&P 500 fell nearly 12% in days before rebounding when the administration paused and renegotiated some measures. Artificial intelligence remained the primary engine of growth during the year. The buildout of data centers and the demand for specialized chips saw companies like NVidia lead the bull rally and become te first US company to reach a $5tn valuation during the year. Meanwhile, after battling "sticky" inflation for much of the year, the Federal Reserve cut interest rates three times in the fourth quarter to address a softening labor market. As with other markets, Gold and Silver had a standout year even in the USA – the latter due to its industrial role in green energy and in the AI grid. Bitcoin also hit a lifetime high during the year before settling down by the year-end. 

    The Federal Reserve’s monetary policy remained a central focus. The above graph shows how the Fed has injected liquidity into the system by reducing interest rates by 200bps during the year, even though inflation has not reduced at the same rate. This strategy of front-loading the interest rates can be risky if inflation rears its ugly head once again.

What to expect in 2026

    The consensus view is that 2026 can see high single digit growth in the US. This view is backed by expectations of corporate earning growing much higher than the 10-year average of 8.6%. Further, growth is expected to spread to stocks behind the Fab seven, as they begin to realize productivity gains from AI. Markets are also likely to price in a reduction in trade fiction, as the shock of the 2025 tariffs fade and new trade agreements are finalized. Finally the "One Big Beautiful Act" (tax cuts passed in 2025) will continue to lower corporate tax bills through 2026, acting as a massive fiscal stimulus for US-based companies.

    The risks to the above scenario include the ability of the Fed to keep inflation under control and lower interest rates further, ability of the vast majority if businesses to harvest AI for productivity gains, geopolitical stability and Policy stability by the Trump administration, especially on the tariff front.

2026 outlook

    According to the International Monetary Fund (IMF), the global economy is entering 2026 with a theme of "Tenuous Resilience." While growth is holding steady, it remains below historical averages as the world adjusts to a new era of trade protectionism and shifting industrial policies. 

    As shown in the graph above, except Japan all major economies are expected to grow slightly more than they did in 2025. Global growth is therefore expected to remain relatively flat compared to 2025, with a slight deceleration as the "AI investment boom" begins to normalize and the impact of 2025's trade tariffs fully filters through global supply chains. India remains the fastest growing major economy in the world with DP growth expected at 6.6%. US is expected to grow at 2.1% on the back of domestic demand and tax reforms, although sticky inflation remains a big risk. China is forecasted to grow at around 4.8% as the country struggles to balance its property sector debt with aggressive investments in green energy and high-tech manufacturing. The IMF notes that the 2026 outlook is a potential "Goldilocks" period for specific markets—where inflation is cooling fast enough for central banks to cut rates, but growth remains robust enough to avoid a recession.

Summary

    In summary, 2025 was a sub-par year for Indian investors, and a super year for US investors. While 2026 holds out the promise for continued economic growth, certain global events can derail this possibility. Long term investors should look for opportunities to accumulate quality assets into their portfolio at every possible opportunity and stay invested. Keep in mind that stock picking is a highly overrated skill whereas having the patience to stay invested is highly underrated.

    Meanwhile I am using this occasion to reiterate the fundamentals of long-term investing 

1. Asset allocation – Diversify your financial assets across Debt, Equity, Real Estate, gold, International Equity, etc. depending on your risk profile and age. Real Estate and Gold assets should ideally be used to satisfy consumption needs only. One simple rule of thumb to do this quickly is to subtract your age from 110. The number you get should be the percentage of your assets that you should allocate to equity - the rest should be allocated to Debt and other assets.
2. Financial planning - Identify your financial goals and classify them by time horizon – short term, medium term and long term. Use Debt assets to achieve short term goals, mix of Debt and Equity assets to achieve medium term goals and Equity assets for achieving long term goals. This will be the basis of your financial plan.
3. Reviewing your plan - Review your financial plan yourself or with the help of your advisor ideally once a year and make adjustments to your asset allocation depending on the prevailing market situation.
4. Invest right - When it comes to equity, invest in quality businesses with a reasonable margin of safety and then have the patience to allow the markets to give you returns. This calls for persistence in the face of volatility. Speak to your financial advisor whenever you are in doubt and need a second opinion.

    I also want to take this opportunity to thank you for putting your faith in our investment thesis and in our icAdvisor service with your hard earned money. Your continued trust makes us stay committed to the vision encapsulated in our tagline – ‘Growth through Knowledge’. I am available to address client queries at all times and am approachable via email or whatsapp.

    Finally I wish you and your family a very healthy, happy and prosperous 2026 in the hope that our relationship will continue to strengthen and grow in the years ahead!

Abhijit Talukdar

Founder, Attainix Consulting

SEBI Registered Investment Adviser – INA000006703
Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

2024 - Letter to Clients

 

2024 was the first Covid free year after the pandemic first appeared in 2020. The virus not only affected human health and took lives but it also negatively affected economic activity around the world. As the pandemic started receding in 2023, Central banks lowered interest rates and Governments started handing out doles and essential food items in order to support life and restore the economy.  The cumulative effects of these actions were visible in 2024.

India Markets

Here is how the various asset classes in India have performed in the past decade

The Indian markets saw significant recovery and growth in 2024, particularly in Midcap and Smallcap stocks, which gave impressive returns of 24.0% during the year. The broader market also did well with a 14.5% return, outperforming the Nifty which delivered 8.8%. This trend was bolstered by improved corporate earnings, rising consumer demand, and sustained foreign portfolio investments (FPIs). In this backdrop the icAdvisorIndia portfolios, which are oriented towards a mix of Largecaps, Midcaps and Smallcaps, also delivered superior returns during the year. Gold saw notable gains of 19.0%, reflecting its appeal as a safe-haven asset. Debt markets provided modest returns, with long-term instruments yielding 7.0%, slightly benefiting from rising interest rates. Debt instruments, particularly at the longer end of the duration curve, also provided stable returns, benefiting from RBI's interest rate trajectory.

The RBI continued its dual mandate of controlling inflation within the target band of 4% (+/- 2%) while fostering economic growth, maintaining the repo rate at 6.5% for the year, emphasizing inflation control and economic growth. The year saw inflationary fluctuations, peaking at 6.21% in October before easing to 5.48% by November. These dynamics impacted market sentiment, with sectors reliant on discretionary spending witnessing intermittent volatility. In 2023 and early 2024, the RBI's proactive repo rate adjustments were instrumental in curbing inflation, which had shown signs of acceleration due to global factors such as elevated energy prices and supply chain disruptions. By mid-2024, inflation began to stabilize, aligning closer to the RBI's target range. This stabilization has created room for potential future rate cuts, signalling a shift in monetary policy towards growth stimulation.

Additionally, speculation around the general elections and policy continuity influenced investor behavior, causing fluctuations in key indices during the latter half of the year. Before the election, the net profit of the Indian banking sector surpassed $35.9 billion at the end of April 2024 for the first time. During the election, Indian equities saw their worst day in 4 years, dropping 6% after exit polls showed no absolute majority for the BJP. The Indian stock market surpassed the $5 trillion mark, reflecting strong performance, but faced short-term instability. Ripples from China’s deepening real estate challenges affected global investor sentiment, although India remained relatively insulated due to its strong domestic consumption base. The escalating Middle East crisis and its impact on energy prices created short-term market volatility, particularly in energy and logistics sectors.

In summary, 2024 offered a mix of challenges and opportunities for Indian stock market investors. The equity markets benefited from strong domestic demand and strategic government interventions, even as external headwinds tested investor resilience. Those with diversified portfolios and a focus on emerging sectors found the most success, positioning themselves well for the potential growth of 2025. However, those investors who entered the Indian markets in the latter half of the year are most probably seeing red in their folio at the end of the year, and waiting to recoup their losses in 2025.

USA Markets

Here is how the various asset classes in USA have performed in the past six years

The US markets continued their robust recovery in 2024, with the S&P 500 gaining 23.3%, building on its strong 26.9% rally in 2023. Technology stocks, which led the rebound in 2023, remained a driving force behind the market's performance. The Dow Jones Industrial Average (DJIA) rose by 12.2%, while small-cap stocks outperformed, with the Russell Smallcap Index climbing 25.0%. In contrast, bonds offered modest returns, with high-yield bonds yielding 7.0%. Inflationary pressures eased compared to the highs of 2022 and early 2023, but the Federal Reserve maintained its cautious stance, keeping interest rates elevated to achieve its 2% inflation target.

The icAdvisorUSA portfolios, with their strategic focus on technology and growth sectors, delivered competitive returns, aligning with the continued strength of the tech sector. As inflation moderates further, opportunities in growth-oriented assets are expected to persist, setting the stage for potential outperformance in 2025.

The US elections, held in November 2024, played a pivotal role in shaping market sentiment throughout the year. Historically, election years are marked by heightened volatility, as investors weigh the implications of potential policy changes. This trend held true in 2024, with market fluctuations intensifying in the months leading up to the elections. Speculation around fiscal policies, taxation, and regulatory changes led to intermittent corrections in key indices, particularly in sectors sensitive to government spending and policy shifts, such as healthcare and energy. Despite the election-related uncertainty, markets rallied post-election as Investors largely viewed the results as conducive to economic growth, providing a boost to the markets.

The Federal Reserve’s monetary policy remained a central focus. Inflation moderated compared to the peaks of 2022 and early 2023 but stayed slightly above the Fed's 2% target. Consequently, the Fed maintained elevated interest rates to keep inflation in check, avoiding rate cuts despite growing investor anticipation. This approach provided stability but also kept borrowing costs high, tempering growth in certain interest rate-sensitive sectors like real estate and fixed income.

Looking ahead, the 2024 elections has set the stage for policy continuity or potential shifts that could shape economic trajectories in the coming years. The resilience of US equities during a politically charged year underscores their appeal, but investors will closely monitor fiscal and monetary developments in 2025 for further opportunities and risks.

2025 Outlook

Growth in 2024 for India has been revised up by 0.2 percentage point to 7.0% relative to 2023, as rural consumption is benefiting from an improved agricultural season, and as public infrastructure investment continues to expand. According to the IMF, India’s GDP growth is expected to moderate to 6.5% in 2025. With this, India remains the world’s fastest growing major economy. 

As the above chart shows, India, China, Russia and the United States are forecast to see slower growth between 2024 and 2025. There have been several notable revisions since the July 2024 World Economic Outlook. For example, the U.S. has had an upwards revision to a forecasted growth of 2.8 % in 2024, from the previously estimated 2.6 %. In 2025, growth is expected to slow to 2.2 % in the U.S. as fiscal policy is gradually tightened and a cooling labor market slows consumption. This is still an improvement from the July forecast, which had estimated growth at 1.9 %.

In terms of risks ahead, the IMF warns of new potential spikes in commodity prices amid ongoing geopolitical conflicts as well as knock-on effects if China sees a deeper - or longer than expected - contraction in the property sector.

Summary

In summary, 2024 was a goodyear for investors, both in India and in the USA, despite the impact of elections. While 2025 holds out the promise for moderation of inflation and reversal of repo and Fed rates, certain global risks can delay these events. Long term investors should look for opportunities to accumulate quality assets into their portfolio at every possible opportunity.

Meanwhile I am using this occasion to reiterate the fundamentals of long-term investing 

1. Asset allocation–Diversify your financial assets across Debt, Equity, Real Estate, gold, International Equity, etc. depending on your risk profile and age. Real Estate and Gold assets should ideally be used to satisfy consumption needs only. One simple rule of thumb to do this quickly is to subtract your age from 100. The number you get should be the percentage of your assets that you should allocate to equity - the rest should be allocated to Debt and other assets.
2. Financial planning - Identify your financial goals and classify them by time horizon – short term, medium term and long term. Use Debt assets to achieve short term goals, mix of Debt and Equity assets to achieve medium term goals and Equity assets for achieving long term goals. This will be the basis of your financial plan.
3. Reviewing your plan - Review your financial plan yourself or with the help of your advisor ideally once a year and make adjustments to your asset allocation depending on the prevailing market situation.
4. Invest right - When it comes to equity, invest in quality businesses with a reasonable margin of safety and then have the patience to allow the markets to give you returns. This calls for persistence in the face of volatility. Speak to your financial advisor whenever you are in doubt and need a second opinion.

I also want to take this opportunity to thank you for putting your faith in our investment thesis and in our icAdvisor service with your hard earned money. Your continued trust makes us stay committed to the vision encapsulated in our tagline – ‘Growth through Knowledge’. I am available to address client queries at all times and am approachable via email or whatsapp.

Finally I wish you and your family a very healthy, happy and prosperous 2025 in the hope that our relationship will continue to strengthen and grow in the years ahead!

Happy Investing.

Abhijit Talukdar

Founder, Attainix Consulting

SEBI Registered Investment Adviser – INA000006703

Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Corona pandemic – rebalance your portfolio now

Only when the tide goes out do you know who has been swimming naked.

Warren Buffett

We are now in the 13th day of a three week lockdown in India that is being enforced by the Government to arrest the spread of the global corona pandemic which has gripped the entire world. The speed with this virus has spread all over the world is truly terrifying. But perhaps it indicates how much people are on the move nowadays, and how much more they have to travel regularly in today’s commercial world. As of today more than 90 countries and half of humanity is in complete or partial lockdown all over the world! This is because the most effective way of stopping this virus from spreading is to maintain physical distancing from everyone else.

As I had mentioned in my previous post, lockdowns may stop the virus from spreading but they have economic consequences. Shutting down businesses means people lose jobs. The Government is urging many employers to let their employees work from home. While this is eminently doable for services business, it is hardly possible to implement work-from-home in the manufacturing sector. Even if people do not lose jobs, their income will be curtailed in the short term reducing their purchasing power thus negatively impacting the economy. Governments have announced major fiscal stimulus packages in anticipation of such economic slowdowns. There have been debates in some countries whether the economic cost of a lockdown will be more than the damage caused by the virus itself. That is why the response of Governments around the world to this virus has been different. This is illustrated nicely in the chart below

Notice that India is highest on the stringency scale and lowest on the fiscal stimulus scale on this chart. What does this imply – in short it means that India has the best chance among all these countries to be the least affected (economically) by the virus. And in case India’s containment strategy falls short, the Government has more room to announce more stimulus packages in the future. As of today, when I compare the corona virus numbers, India’s strategy seems to be working - touchwood. Notice also that China which adopted a less stringent policy than India has already started coming out of the lockdown and has started resuming normal manufacturing activities, in less than three months. You can extrapolate this to estimate yourself how soon normal life will start resuming in India.

The United Nations estimates that only China and India, among the large economies, will come out of this pandemic with a positive GDP growth rate. The rest of the world will go into a recession. The chart above certainly gives credence to this forecast. If you also believe that the India growth story - while impacted in the short term - is going to be largely intact in the medium and long term, then this is the right time for you to do the following:

• Review your portfolio now and rebalance it to invest into those businesses that will be the beneficiaries of India’s growth story.
• Review your asset allocation. It is likely that your exposure to equities has fallen due to the correction in the stock markets. This is the time to restore your asset allocation by moving some money from debt to equities.
• Diversify your portfolio as per your own risk profile. Be aware that too much diversification may negatively affect your returns.
• Keep at least six months of living expenses in cash/liquid instruments. 
• Finally, stay calm and stay invested.

Having said all of the above, Be aware that this is the time to be aware and alert. There is no room for complacency, because of the possibility that the situation may get worse before it gets better.

Nifty drops below 11000 again. Should I exit now?

The benchmark Nifty ended the week at 10,829 bouncing back from a 6 month low of 10,637 in the final trading session of the week. The sudden uptrend in the Nifty started after about 1 pm on Friday afternoon, which probably means that the market had got wind of the impending policy announcements by the Finance Minister later in the day. And right on cue, these announcements came after the close of the markets. The Finance Minister Ms Nirmala Sitharaman sought to assuage investor sentiment by rolling back the surcharge on Foreign Portfolio Investors on the one hand while increasing liquidity with a capital infusion of Rs 70,000cr into the banking system on the other. Other announcements included cheaper home and vehicle loans, better transmission of RBI policy rates and quicker GST credit for MSMEs etc. These announcements were timed to address the wide discontent with the performance of the overall Indian economy and the stock markets are expected to cheer these decisions when they reopen on Monday.

So the Government is clearly worried about the economy and is taking short term measures to stem the tide. But experts believe this is not enough – much more needs to be done at a structural level to stem the tide. Notable among these include increasing income for farmers in the agricultural sector, job creation in the manufacturing sector and NPA resolution in the services sector. Truth be told - the NDA Government has addressed these issues in its first term – it just needs to continue addressing them more into its second term. Ultimately the annual GDP growth rate which has slowed to a 5 year low of 5.8% for the last quarter of 2018-19 needs to be reversed back to 8.5% plus and more in order to achieve the Government’s own target of a $5trillion economy by 2024. Is this target realistic? Let’s look at the forecast of the International Monetary Fund (IMF) for the top 10 economies of the world.

Country	2018 actual GDP ($tn)	2018 actual rank	2024 projected GDP ($tn)	2024 proj. rank	GDP proj. growth rate
United States	20,494,050	1	25,728,734	1	3.30%
China	13,407,398	2	21,309,503	2	6.84%
Japan	4,971,929	3	6,848,808	3	4.68%
Germany	4,000,386	4	4,912,299	4	2.98%
United Kingdom	2,828,644	5	3,399,017	6	2.66%
France	2,775,252	6	3,354,126	7	2.74%
India	2,716,746	7	4,729,319	5	8.24%
Italy	2,072,201	8	2,323,028	9	1.65%
Brazil	1,868,184	9	2,468,216	8	4.06%
Canada	1,711,387	10	2,242,038	10	3.93%

Despite the recent slowing down of the global economy, the IMF forecasts that the top 10 economies will continue to grow for the next 5 years with India growing the fastest among the bunch. This will result in India climbing up two steps in the ladder while Brazil will climb up one. The IMFs forecast of $4.7tn for India is close to the Indian Government’s own $5tn target, implying that it is indeed realistic but a stretch target. In order to get there at least one of the three growth drivers – consumption, investments and exports – will have to lead the charge. If two or more drivers fire together we will hit the bull’s eye with ease.

What to Do?

Steep market corrections instill fear and a sense of impending gloom and doom amongst investors. At such times, it is perhaps best to take a step back, look at the bigger picture and try to answer some basic questions. 

• Is India’s fundamental growth story still intact? Largely yes. 
• Is the Government doing all it can to stem the tide?  It has made an earnest beginning. 
• Will the Government do all it can to get back on the growth trajectory? It has no choice if it has to achieve its own $5tn target. 

Add all these answers together and it should be pretty obvious what you need to do as long-term investors in the Indian markets. If you still have questions or doubts, reach out to your SEBI Registered Investment Adviser who will be able hand-hold you through this patch of turbulence in the Indian economy. 

Happy Investing.