TCS To Coforge: Motilal Oswal Bets On Large Caps And Domestic Themes

As we plough through 2025, the global economic landscape finds itself mired in volatility, marked by an unpredictable tariff war led by the US. Despite these global tensions Motilal Oswal Financial Services remains optimistic about India's relative resilience and long-term growth prospects.

Geopolitical tension has triggered sharp market corrections the brokerage pointed out, raising concerns about global demand, liquidity, and earnings potential. However, India stands “relatively” less affected than peers like China and Vietnam due to lower tariff exposure and stronger domestic resilience, Motilal Oswal added.

India's policymakers have responded proactively with fiscal and monetary stimulus to revive consumption and support macroeconomic stability, pointed the brokerage. Key measures include tax reliefs, CRR and repo rate cuts, OMOs, and FX swaps. These steps, along with easing inflation, support a positive medium- to long-term outlook despite near-term earnings challenges, said Motilal Oswal in its report.

The fourth quarter of the previous fiscal is expected to mark another soft quarter, with Nifty-50 earnings projected to grow by only 2% year-on-year. Weak earnings in oil and gas, real estate, cement, and auto sectors are offset by growth in metals, telecom, technology, healthcare, and BFSI, pointed the report. Notably, telecom and metals are anticipated to lead recovery with strong year-on-year gains, while O&G remains a key drag. Small-caps are expected to underperform, while mid-caps show modest resilience.

For financial year 2025, Motilal Oswal has trimmed Nifty EPS estimates by 2.9% and 3.8% for financial year 2026, projecting 1% and 14% year-on-year earnings growth respectively. Despite these revisions the brokerage said a recovery in financial year 2026 is expected, aided by a low base and supportive domestic macro factors.

However, there has also been a 6% recovery in the Nifty in March 2025, suggesting signs of stabilisation. Valuations have become more attractive for large-caps, with the Nifty P/E falling below long-period averages and the earnings yield to bond yield ratio reaching multi-quarter highs. In contrast, mid- and small-cap indices remain elevated.

The report maintains an overweight stance on large-caps and domestic-facing sectors. Top picks include Reliance Industries Ltd., Bharti Airtel Ltd., ICICI Bank Ltd., Larsen and Toubro Ltd., Tata Consultancy Services Ltd., and Hindustan Unilever Ltd. among large-caps, and Indian Hotels Ltd., Dixon Technology Ltd., Coforge Ltd., and Page Industries Ltd. among mid and small-caps.

Portfolio shifts reflect increased weight in HDFC Bank Ltd., Kotak Mahindra Bank Ltd., TCS, and Tech Mahindra Ltd., while maintaining underweight positions in automobiles, cement, and real estate.

While the near-term outlook remains clouded by global uncertainties and weak earnings, India’s medium- to long-term prospects continue to be promising. Strong domestic flows, proactive policy responses, and a relatively favourable global position bolster confidence. The key risk remains the unresolved and evolving global tariff conflict, which could significantly alter market dynamics.