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Motilal Oswal Report
The corporate earnings scorecard for Q2 FY25 has been weak but excluding commodities, it's broadly in-line. The earnings spread has deteriorated, with only 62% of our coverage universe either meeting or exceeding profit expectations. Consumption has emerged as a weak spot while select segments of BFSI are seeing asset-quality stress.
Nifty FY25 EPS has seen another 1% cut after a 4% cut in preview. Overall Nifty EPS has seen 7% downward revision in last six months, reducing the expected FY25 earnings growth to just 5%, weakest since FY20. The Nifty is trading at a 12-month forward P/E of 20.7 times, in-line with its long-period average of 20.5 times.
Despite the recent 7-8% correction from the highs, the broader markets are still trading at expensive valuations (NSE Midcap 100 at ~30x forward P/E).
We had made several important changes in our model portfolio in Q2 FY25 preview where we raised the weights in BFSI, Technology, Healthcare with a distinct bias towards large-caps.
Our model portfolio reflects our conviction in domestic structural as well as cyclical themes. We are over weight on IT, healthcare, BFSI, consumer discretionary, industrials and real estate. In contrast, we are under weight on metals, energy, and automobiles.
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