Motilal Oswal Wealth Management released its market outlook for the year 2025 report, forecasting first half to witness market consolidation while the second half is likely to be a recovery process.
Primary factors contributing to the forecast include potential rate cut by RBI in February 2025, the after-effect of US rate cuts, and plausible trade policy changes post Donald Trump taking over as US President, and the Union Budget in February 2025.
Earnings are expected to recover in the second half, driven by increased rural spending, a buoyant wedding season, and pickup in government spending. Earnings are likely to deliver 16% CAGR over FY25-27E. Moreover, the recent market correction and the moderation in valuations offer an opportunity to add selective bottom-up stock ideas.
In the near term, the brokerage urged investors to “maintain an overweight position in large-cap stocks while selectively allocating to mid- and small-cap stocks”. The sector preferences being as follows:
Overweight: IT, Healthcare, BFSI, Consumer Discretionary, Industrials, Real Estate, and niche themes like Capital Market, EMS, Digital e-comm, hotels.
Underweight: Metals, Energy, and Automobiles.
Sectoral Performance Outlook
The BFSI sector seems poised to pick-up, bound by expected repo rate cuts in Q1CY25. The Capital Markets theme remains constructive, driven by the rise in retail participation, surge in demat accounts, and the ongoing financialisation and digitisation of savings.
After two years of a depressed spending, the US tech sector is likely to see a recovery. This trend is potentially beneficial for the Indian IT sector.
The Consumer Discretionary sector stands to benefit from rapid shifts in consumer purchasing behavior, with a transition from unorganized/local to organized retail channels.
Going Forward
India remains well-positioned, as per the report, to be at the forefront of the global digital infrastructure space. Herein, e-retail penetration expected to hit 10% by 2027. The government’s initiatives to promote component manufacturing and localization are likely to boost the industrial segments, such as data centers, transmission, electronics, and EMS, driving increased order inflows for capital goods companies.
Top Picks: ICICI Bank, HCL Tech, L&T, Zomato, NAM India, Mankind, Lemon Tree, Polycab, Macrotech Developers, Syrma SGS
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