Stocks To Buy: HDFC Bank, Bharti Airtel, Coforge Among Motilal Oswal's Top Idea Picks In Mid And Small Caps

Motilal Oswal Report

After a relentless rise, valuations have moderated from the CY24 highs. The 12-month forward P/E of Nifty-50 trades at 19.9x in December 24 (versus 22.5x in Sep’24) at a discount to its long period average of 20.5x. Notably, Nifty-50’s earnings per share compound annual growth rate of 17% over FY20-25E (at Rs 1,061 in FY25E) has been higher with the index CAGR of 14% during the last five years (ending Dec’24).

Further, Nifty-50’s earnings are anticipated to clock an 11% CAGR between FY24 and FY26.

Despite recent corrections, mid-cap and small-cap indices trade at premiums of 56% and 17% over the Nifty-50, at ~31 times and 23 times, respectively. Thus, large caps remain attractive amid historically high valuations for broader markets.

Against this backdrop, we would maintain cautious optimism for potential upside, though lower than the past two years. We remain optimistic on IT, healthcare, BFSI, consumer discretionary, industrials, and real estate sectors with a distinct bias towards large-caps.

Top Ideas:

Among large-caps, we favor HDFC Bank, Bharti Airtel, SBI, L&T, HCL Tech, M&M, Zomato, Titan Company, Mankind Pharma, and Dixon Tech.

Among mid- and small-caps, we are bullish on Indian Hotels, Cummins India, Kaynes, BSE, Godrej Properties, Coforge, Metro Brands, Ipca Labs, Angel One, and JSW Infra.

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