Motilal Oswal's Rajat Rajgarhia sees 2025 delivering good returns just like 2024, and said sees demand for consumption should improve and start to reflect in the December quarter results.
"Consumption companies have seen negative volume growth in the September quarter. In December quarter, we see that trend getting better, and in some pockets you may even see volume growth coming back," the MD and CEO of Motilal Oswal Institutional Equities told CNBC-TV18 during a conversation on December 13.
India's rural demand seems to be intact while the urban demand has shown signs of weakening. From a macroeconomic perspective, the consumption growth is likely to remain weak, Motilal Oswal said in a recent note, but the real Personal Final Consumption Expenditure (PFCE) could grow 5-6% in FY25 and FY26, it said, which will be better than FY24 but weaker than the long-term trend.
"The volume trend is expected to see stability with a gradual upward trend. Companies are also implementing price hikes; thereby, the price cut-led pressure on revenue growth is behind," said a recent note by MOSL Research on the consumption trend after the second quarter earnings.
Rajgarhia said at Motilal Institutional, they will be watching out for three themes during 2025.
-All capital market-related plays such as broking, AMCs, market intermediaries are not just a bet for the next year, but they will hold true over the next five years, said Rajgarhia. MOFSL has initiated coverage on the sector with a Buy call on HDFC AMC, Nippon AMC, ABSL AMC, and UTI AMC.
India's capital market has seen a strong period of growth since the pandemic, with demat accounts rises 4.4x (17.9 crore), Unique MF investors growing by 2.4x (5 crore), and monthly SIPs soaring by 3.2x (Rs 25,300 crore) between FY20 and October 2024. Over the next 10 years, India's demographic dividend is expected to result in 10 crore people joining the labour force and 10 crore households entering the middle class income group, thus lending support to the momentum of household saving in equity investment.
MOFSL also recommended a Buy BSE, Angel One, Nuvama Wealth and 360 One WAM.
-As the interest rate cycle eases, banking shares are expected to make a comeback in 2025. Rajgarhia said the shares are now near valuations that seem reasonable, given where the earnings are. The BSE Bankex index is higher by 12% so far this year, with two stocks, HDFC and ICICI Bank making up more than half the weightage on the index.
The house has recommended a Buy on private lender ICICI Bank with a target price of Rs 1550, implying a 17% upside, citing robust loan growth and its focus on profitable growth.
-Capex as a theme too is expected to outperform in 2025, and looks set to be in an early stage of a five-year cycle, said Rajat Rajgarhia.
The view on Dalal Street is that the capex slowdown of H1FY25 was largely due to General and State elections, as well as a prolonged monsoon season. Now, it is expected that the capex spend by Centre should resume in 2HFY25, and project execution may accelerate. While the FY25 capex target of Rs 11.11 lakh crore is likely to be missed, but a strong growth compared to a year ago is expected after the slow first half. It will still be a 'significant increase' compared to last year's capex of Rs 9.5 lakh crore, DEA Secretary Ajay Seth had recently said.
Motilal Oswal Institutional is basing its bullish outlook on two factors. One, that the interest rates are likely to be more accommodative from February onwards. And two, the government's capex spend is expected to gather pace, which had its share of impact during the first half of the fiscal, Rajgarhia said. He added that the stock market has now started to look far more 'bottom up', and if one picks companies where earnings are on the rise, there is potential for a lot wealth creation.
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