Stock Market Investment Strategy:Even though the calendar has changed from 2024 to 2025, the underlying backdrop for Indian equities remains largely unchanged. After a explosive rally in CY23 and 9MCY24, Indian markets are currently going through an interim phase of course correction, with Nifty-50 down 10% from its peak. This correction in the market has coincided with a slowdown in earnings growth, as Nifty-50 has achieved only 4% PAT growth in 9MFY25E (after 20%+ CAGR during FY20-24).
This slowdown is due to a broad slowdown in consumption (especially urban), government capex cuts, and a more cautious approach by banks towards unsecured personal loans, due to which the credit growth rate has declined from 16-17% to 11-12% currently. % is left. Apart from this, urban consumers are troubled by rising prices, although rural consumption is showing signs of improvement. The credit for which goes to the better monsoon, which has been more than 8 percent of the long-term average. Brokerage house Motilal Oswal has released its report on which factors will be important for the market going forward, how will be the earnings season, where will investment opportunities be created.
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Earning season forecast
The brokerage estimates that in the third quarter of financial year 2025, there may be a growth of 6% in the earnings of Nifty-50 on an annual basis. Excluding Metal and O&G, it is estimated that Nifty earnings will grow by 8% on an annual basis in the second quarter of FY 2025. EBITDA margin (ex-financials) for the MOFSL universe is likely to be flat YoY, reaching 17.1 per cent, mainly supported by healthcare and telecom. But it will decline due to commodities and cement sector. Meanwhile, margins for Nifty-50 are expected to grow by 30 basis points to 20.2%. Overall modest earnings growth was largely driven by BFSI (+8% YoY), as well as Capital Goods (+26% YoY), Technology (+9% YoY), Healthcare (+19% YoY) and Real Estate (+58% YoY) ) is estimated to be driven by sectors.
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In contrast, earnings growth is likely to be weakened by global cyclical factors, such as metals (-8% YoY), O&G (-4% YoY), and cement (-45% YoY). Meanwhile, consumer durables (+31% YoY) and retail (+30%) are expected to deliver strong growth, while auto (+3% YoY) and consumer (+1% YoY) are expected to show flat performance. The brokerage has reduced its FY25E and FY26E Nifty EPS by 0.6% and 1.7%. While it is estimated that Nifty EPS will grow by 4%/16% in FY25/FY26.
Eyes on budget and RBI policy
Talking about the coming days, the Union Budget is going to be a defining moment, which will draw attention on the signs of improvement in government capex and immediate measures to boost consumption. Apart from this, RBI’s monetary policy in February 2025 will also be important in shaping the interest rate trend. The brokerage believes that the RBI will initiate a modest rate-cut cycle to ease concerns about the economic slowdown. Additionally, rural incomes and consumption are expected to improve due to the anticipated positive impacts of improved monsoon, better Kharif crop yields and promising Rabi sowing as well as increased government spending.
Globally, the most important factor keeping the markets on edge will be the adherence to protectionist promises made by the incoming Trump administration. Markets will remain volatile as they deal with government rhetoric and the challenges of implementing the radical “Make America Great Again” initiative.
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(Disclaimer: The advice to invest in stocks has been given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert opinion before investing.)
