With the wars between Ukraine-Russia and Iran-Israel, and corporations facing their own sets of issues for earning the year 2024 has been quite dicey with numerous ups and downs. Despite some volatility, the Indian stock market performed well in 2024. The constant inflow of capital from local investors was the main driver of the bullishness. This year, the Nifty was up almost 10%. However, the larger market has taken centre stage. In 2024, the BSE Small cap index was over 30%, while the BSE Midcap index was around 25%.
In general, these gains show how money is moving into the market from Indian investors.
Gold Investments in 2025
According to experts, due to increased gold demand and fluid economic conditions, the prices are expected to go low. Rising geopolitical fears and strong retail demand throughout the wedding and holiday seasons mostly brought on last year’s positive impact on gold. Investors turned to gold as a safe-haven hedge for these reasons as well as the fact that inflation did not decline as much as anticipated. Gold has an excellent track record of protecting wealth over the long run. That opinion was amply reinforced in investors’ thoughts in 2024. Therefore, if inflation stays high, 2025 might see a repeat performance.
Additionally, if another conflict broke out this year, safe haven buying would cause gold prices to rocket to all-time highs. Additionally, during the past few years, central banks all over the world have been purchasing large amounts of gold.
The Risks of Investing in Gold
On the contrary, there is uncertainty about the plans of Donald Trump, the next president of the United States.
Since Donald Trump won the US election, the dollar has appreciated, which has put some pressure on the price of gold.
This is because the markets believe his actions will increase the currency’s worth. If the US economy improves, money will flow back to US companies and assets.
Furthermore, if trade disputes with China lead to an increase in inflation, the US central bank will not drastically cut interest rates. Interest rates are down, which helps gold. It will be bad for gold if the interest rate drop is temporary.
Stock Market Investments in 2025
With Nifty having a fall of around 10%; the stock market doesn’t look much promising for the year 2025 as believed. Let us go through in detail the same:
The Indian stock market’s main focus was liquidity. This flood of cash was the main factor behind the market’s consistent optimistic outlook for most of the year. Stocks were able to hold their high values even when there was a discernible slowing in the increase of earnings. Investors didn’t have to confront reality until the end of the year. Consequently, positive feelings decreased. As a result, many stocks, especially large-cap stocks, saw a decline in value.
However, investors remain positive about the midcap and small cap markets overall in 2025.
Risks to Stock Market Investors in 2025
The Nifty’s PE ratio, a helpful measure of how costly or cheap the market is overall, has continuously stayed above 20 for the entire year. Historically, a PE above 25 for the Nifty has been seen as overpriced. It will be around 22 by the end of 2024.
The same is true for the entire market, even more so than the Nifty. The retail and HNI population’s favourite options in 2024 have been midcaps and small caps. Thus, it makes sense to conclude that the Nifty’s large caps are cheaper than the market as a whole.
Small caps as a whole can be considered overvalued if this ratio rises beyond the long-term median of 0.45. In January 2018, for example, the month after the small cap index’s top, this ratio was 0.58. The small cap index had fallen 40% by then.
At 0.7 right now, the Small cap to Sensex ratio is far greater than that benchmark. Nevertheless, the combined profits of all small cap index companies only account for 36% of the total profits of all Sensex companies.
This suggests that small-cap stocks are dangerous right now. Investors are paying outrageous amounts for profits that might or might not be realized in the future.
Even if our prognosis for 2025 is not pessimistic—in fact, we are extremely optimistic about the long run—we cannot ignore the risks that are mounting in the market, particularly in midcaps and small caps.
In conclusion, gold and stocks each serve unique purposes in a portfolio that is well-balanced. Long-term wealth creation is provided by fundamentally strong stocks, while gold ensures asset preservation against inflation. Investors should keep a varied approach with frequent reviews to guarantee growth and stability in their financial journey.