Investing.com -- India’s oversold equity market could be at a turning point for the rest of 2025, on the back of improving fundamentals and stronger macroeconomic stability.

India would recover lost ground against emerging markets, backed by mid-to-high teen annual earnings growth over the next 3-5 years, a private capex cycle, and rising discretionary consumption.

Macro (BCBA: BMAm ) stability factors include a declining primary deficit, falling inflation volatility, and improving trade terms.

Amid market pessimism, analyst at Morgan Stanley noted positive overlooked factors, including a capex-driven budget, a more accommodative RBI stance, tax reforms boosting foreign inflows, and a strategic trade deal with the U.S.

Analysts pointed to lower oil prices, a correction in the U.S. dollar index , and improved foreign portfolio investment flows.

Key catalysts for Indian equities include stronger growth data, dovish RBI policies, and potential earnings beats. However, the outlook remains sensitive to global risks, with a U.S. recession posing a key challenge.

Morgan Stanley favors cyclicals over defensives and small/mid-caps over large caps, with overweight positions in financials, consumer discretionary, industrials, and technology.