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Motilal Oswal Report
Over the past five years, the Nifty-50 has delivered stellar returns at 17% compound annual growth rate, supported by equally impressive corporate earnings CAGR of 18%, resulting in an increase in Nifty profits to Rs 7.9 trillion in FY24 from Rs 3.5 trillion in FY19.
We expect earnings momentum to sustain; albeit, the magnitude of its growth is expected to moderate to ~15% over FY24-26. As highlighted in our report – Nifty-50 P/E dissection: Devil is in the details!, the Nifty P/E remains well within its 10-year average range and is expected to maintain this level going forward.
We remain constructive on the markets, and our preference is predominantly in favor of large-caps, as the valuations of mid- and small-cap indices are trading at a premium of 59% and 5% to Nifty-50, respectively.
Our model portfolio underscores our strong belief in domestic structural and cyclical themes. We continue to remain bullish on PSU Banks, consumption, industrials, and real estate, and we have turned constructive on technology. We also remain positive on healthcare, and remain underweight on private banks and energy.
Top ideas: Largecaps – ICICI Bank, SBI, HUL, L&T, HCL Tech, M&M, Coal India, Titan, Hindalco, and Mankind Pharma;
Midcaps and Smallcaps – Indian Hotels, Godrej Properties, Ashok Leyland, Persistent System, Kalyan Jewellers, KEI Industries, Metro Brands, PNB Housing, Cello World, and Angel One.
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