Bulls And Bears — India Valuation Handbook; Top Idea Picks For Large, Mid, Small Cap Stocks: Motilal Oswal

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Motilal Oswal Report

The market correction has coincided with a slowdown in earnings growth, as the Nifty-50 has managed only 4% PAT growth in 9M FY25 (following a healthy 20%+ CAGR during FY20-24).

The expectations for FY26 corporate earnings (19% for our Universe and 15% for the Nifty-50) are still somewhat elevated, in our opinion, given the underlying macro-micro backdrop and are thus ripe for further downgrades.

The recent correction in broader markets factors in some of the potential disappointments in earnings ahead. That said, the valuations for midcaps and smallcaps are still expensive vis-à-vis their history as well as versus Nifty-50.

The Nifty is trading at a 12-month forward P/E of 18.6x, below its long-period average (LPA) of 20.5x. Thus, we continue to remain biased toward largecaps with a 76% allocation in our model portfolio.

We are overweight on consumption, BFSI, IT, industrials, healthcare, and real estate, while we are underweight on oil and gas, cement, automobiles, and metals.

Top ideas: Largecaps – Reliance Industries, Bharti Airtel, ICICI Bank, SBI, HUL, L&T, Sun Pharma, Maruti Suzuki, M&M, Titan, Trent, and LTIMindtree;

Midcaps and Smallcaps – Indian Hotels, Dixon Tech, JSW Energy, BSE, Godrej Properties, Coforge, JSW Infra, Page Industries, Ipca Labs, Metro Brands, and Angel One.

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