Motilal Oswal has stated in its latest India Strategy report that Indian equities have experienced a significant correction over the last five months, but they may be approaching the end of this correction phase. The Nifty 50 has seen a 16% correction since late September 2024.
According to Motilal Oswal, the domestic fiscal and monetary policies have become accommodative, which will stimulate demand and growth in the upcoming quarters. The report suggests that the modest earnings growth in FY25 could set the stage for double-digit growth in FY26.
Market valuations, especially in large-cap stocks, have eased, leading to increased interest in sectors such as BFSI, IT, and healthcare due to stable earnings visibility and long-term growth prospects. The BFSI sector is expected to benefit from steady loan growth, improved asset quality, and resilient retail demand.
Among large caps, Motilal Oswal prefers stocks like Reliance Industries, Bharti Airtel, Hindustan Unilever, L&T, Maruti, Titan, Adani Ports, Bharat Electronics, LTIMindtree, Shriram Finance, JSW Energy, and Polycab. For small-caps and mid-caps, HDFC AMC, Coforge, Page Industries, AU Small Finance Bank, JK Cements, Ipca, Godrej Properties, Brigade, Angel One, and Happy Forgings are among their top picks.
The correction in the market is attributed to factors such as modest earnings growth in 9MFY25, continuous FII selling, geopolitical challenges, and a strengthening dollar index diverting funds from various markets. Domestically, lower corporate earnings growth and a slowing economy have also contributed to FII outflows.
However, Motilal Oswal expects the outflows from Indian equities to ease as global factors like the dollar index, S&P500, and US bond yields show signs of improvement. The report suggests that the US reciprocal tariff policy may not have a severe impact on the market.
Overall, Motilal Oswal is optimistic about the outlook for Indian equities and believes that they may be nearing the end of the correction phase.
