Motilal Oswal has stated that the market is currently trading slightly below its long-term average in terms of valuations. The brokerage has a preference for largecaps, with a 76% allocation in its model portfolio. It is overweight on sectors like Consumption, BFSI, IT, Industrials, Healthcare, and Real Estate, while underweight on Oil & Gas, Cement, Automobiles, and Metals.
The market closed lower for the fourth consecutive month, with the Nifty-50 recording a 0.6% decline in January 2025. Largecaps and smallcaps saw gains of 8% and 6% respectively over the last 12 months, while midcaps outperformed with an 11% increase. In terms of global markets, India was among the laggards in January 2025.
DII inflows and FII outflows were at the second-highest levels ever in January 2025. Among the sectors, Media, Real Estate, Healthcare, Utilities, and Capital Goods were the top laggards for the month. Corporate earnings for 3QFY25 have been in line with expectations, but forward earnings revisions are the weakest in recent times.
The Nifty is trading at a 12-month forward P/E of around 20x, below its long-period average. Motilal Oswal remains biased towards largecaps in its model portfolio, with recommendations for specific largecaps, midcaps, and smallcaps.
In conclusion, the brokerage expects a realignment in portfolios with a shift from capex to consumption, and a rebound in the multiples of select sectors. They anticipate a rebound in the multiples of Consumption companies, especially Staples, following a steady de-rating since FY20. The overall view is to overweight certain sectors while underweighting others based on market trends and valuations.
