Since the records notched in September, the benchmark indices have taken a tumble, falling nearly nine percent under their respective 52-week highs. However, according to domestic brokerage Motilal Oswal, the recent correction and the consequent moderation in valuations provide an opportunity to add select bottom-up ideas.
Despite the muted earnings season reported in the quarter gone by, the brokerage found several companies that delivered resilient performances. Apart from strong earnings performance, the shortlisted winning ideas are the ones for which the brokerage has high conviction on or are a part of MOFSL Model Portfolio.
The ten "winners" are: State Bank of India, Larsen & Toubro, Mahindra & Mahindra, Sun Pharma, Indian Hotels, Page Industries, IPCA Labs, Angel One, Amber Enterprises, and Atul.
On the other hand, the brokerage pointed out five laggards based on the Q2 earnings print: Tata Motors, Asian Paints, Avenue Supermarts, ABB India, and IndusInd Bank.
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The brokerage added that the correction over September to November was a result of a variety of factors, such as earnings moderation and elevated valuations in mid-caps and small caps, along with global factors, such as a fragile geopolitical backdrop in the Middle East and a strengthening dollar index after the Trump victory.
"The correction has cooled off the valuations in large-caps, even as mid/small-caps trade at expensive multiples – Nifty-50 is now trading at 19.6x FY26E EPS, while mid-cap/small-cap indices are trading at 30x/23x one-year forward P/E multiples, off from the highs but still rich," said the Motilal Oswal report.
In the earnings season gone by, after a healthy 21 percent CAGR over FY20-24, corporate earnings have moderated in 1HFY25. Earnings growth for Nifty-50 in 2QFY25 was the lowest in 17 quarters.
" We now expect a modest 5 percent growth for Nifty earnings in FY25, the first year of single-digit growth in five years," added the brokerage.
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