'My humble suggestion to new investors is...': Vijay Kedia has a contrarian take on the Union Budget 2025

Veteran investor Vijay Kedia believes that the Indian markets are currently in a “consolidation” phase, and a further 3-5% correction from current levels could be expected, even as the benchmark indices Sensex and Nifty are already down nearly 10% from their September 2024 peaks. In an exclusive interaction with Fortune India, Kedia addressed concerns about market volatility, saying that this is a normal trend and the pain is likely to be temporary.

"We are in a bull market, without a doubt. The Indian economy is rising, and we are going to do well for a long time. Typically, during these rising market trends, and when there isn't a crisis (like the Covid pandemic or the Lehman Brothers collapse), the market experiences normal corrections. Historically, these corrections have seen the market index fall by around 3% to 15% from its peak. I believe it has already fallen about 10% to 12%, so a further correction of 3-5% is due," Kedia told Fortune India.

Budget unlikely to take market to new heights

When asked if the Union Budget 2025 will give any fillip to the market, the ace investor said that the “bold” move to raise income tax exemption limits to ₹12 lakh will provide major relief to millions of taxpayers in the country. However, this stimulus would not be sufficient to take the market to new heights. He highlighted that unemployment is the biggest concern for India, and the country needs to add one crore new jobs every year to boost economic growth.

“The domestic market has been rising for the past three to four years, and now it is in a reaction mode. The market will continue consolidating in different phases. I don't think this budget will take the market to new heights,” he said.

Tourism stocks to be in the spotlight

Responding to a question on sectors that will be in focus post-Budget 2025, Kedia said, “The tax relief to the middle-income group will directly boost consumption, which is why FMCG and automobile stocks have gone up. But I think this is temporary. This money is not enough to stimulate the economy. The government’s focus is on tourism, so stocks related to hotels and airlines should do well.”

FIIs’ downtrend to continue

On the persistent fund outflows by foreign investors, Kedia said that the trend is unlikely to change soon as there is no major driver to pull foreign institutional investors (FIIs) back into the domestic market. However, sustained selling by FIIs will be countered by strong buying from domestic institutional investors (DIIs), limiting the downside.

“I think FIIs will keep selling Indian equities, and DIIs will keep buying stocks. The DIIs will not let the market fall too much, and FIIs will not let it rise significantly,” he said.

Since October 2024, FIIs have sold equities worth $24 billion in the secondary market amid valuation concerns, while DIIs have made net investments of $29 billion during the same period. In January alone, FIIs sold $5.5 billion in the secondary market, while DIIs purchased $6.6 billion worth of equities, according to NSDL data.

Trump's tariffs a cause for concern

When asked about the impact of newly elected U.S. President Donald Trump’s tariff policies on global equity markets, Kedia said this is definitely a cause for concern.

"I'm uncertain about the tariffs Trump might impose, and that's definitely worrying. There's talk that a kind of 'World War III'—specifically a trade war—has begun. Canada has announced tariffs on U.S. goods, and the U.S. has imposed a 10% tariff on China, which will likely lead to retaliation. It seems all countries are preparing to retaliate, creating a situation that resembles a world war, albeit a trade war. I'm unsure of the outcome. India has also announced a reduction in customs duties on certain motorbikes. This trade war atmosphere makes things unclear and uncertain."

Mantra for new investors

Kedia recommended that new investors should start with mutual funds rather than directly buying individual stocks.

“My humble suggestion to all new investors is that when you enter the market, don't invest directly in stocks because you don't yet understand the intricacies of the stock market. You don't understand why stocks fall, nor do you understand why they rise. It's a completely different game altogether, requiring a lot of experience. So, my advice is that new investors should start by investing through mutual funds.”

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