As we navigate through 2025, the global economy is facing significant challenges, particularly due to the ongoing tariff war initiated by the United States. Despite the turbulence on the international stage, Motilal Oswal Financial Services expresses optimism about India’s ability to withstand these pressures and its long-term growth potential. The firm highlights that while geopolitical tensions have led to market fluctuations, India remains comparatively resilient, showing less vulnerability than neighboring countries like China and Vietnam.
India’s Economic Resilience Amid Global Uncertainty
The recent report indicates that market corrections fueled by geopolitical issues have raised alarms about global demand and liquidity, impacting earnings across various sectors. However, India’s relatively lower exposure to tariffs and robust domestic strength have positioned it favorably in this challenging climate. The brokerage emphasizes that Indian policymakers have taken decisive actions to bolster consumption and maintain macroeconomic stability, including:
- Tax relief measures
- Cuts in the Cash Reserve Ratio (CRR) and repo rates
- Open Market Operations (OMOs) and foreign exchange swaps
These proactive steps, combined with easing inflation, suggest a positive outlook for the medium to long term, despite facing immediate earnings challenges.
Earnings Forecast for Key Sectors
Looking ahead to the final quarter of the previous fiscal year, the report predicts a modest growth rate of just 2% year-on-year for Nifty-50 earnings. While sectors such as oil and gas, real estate, cement, and automobiles are expected to struggle, growth in metals, telecom, technology, healthcare, and banking, financial services, and insurance (BFSI) is anticipated to offset these losses. Key highlights include:
- Telecom and metals are likely to drive recovery with significant year-on-year gains.
- Small-cap stocks are projected to lag, while mid-caps exhibit moderate resilience.
Revised Earnings Estimates and Market Trends
For the fiscal year 2025, Motilal Oswal has adjusted its Nifty EPS estimates downward by 2.9%, with a projected 1% growth in 2026. Despite these cuts, a rebound is expected in 2026, supported by favorable domestic conditions and a low base effect. Notably, the Nifty experienced a 6% recovery in March 2025, signaling potential stabilization in the market.
Valuations for large-cap stocks have become more attractive, with the Nifty P/E ratio falling below historical averages. In contrast, mid- and small-cap indices remain elevated, indicating a potential shift in investment strategies.
Investment Recommendations
Motilal Oswal maintains a positive outlook on large-cap and domestic-facing sectors, with recommended stocks including:
- Reliance Industries Ltd.
- Bharti Airtel Ltd.
- ICICI Bank Ltd.
- Larsen and Toubro Ltd.
- Tata Consultancy Services Ltd.
- Hindustan Unilever Ltd.
For mid and small-cap investments, suggested stocks include Indian Hotels Ltd., Dixon Technologies Ltd., Coforge Ltd., and Page Industries Ltd. Portfolio adjustments reflect an increased allocation to HDFC Bank Ltd., Kotak Mahindra Bank Ltd., TCS, and Tech Mahindra Ltd., while maintaining a cautious stance in the automobile, cement, and real estate sectors.
Conclusion
While the immediate future may appear clouded by global uncertainties and lackluster earnings, India’s medium- to long-term outlook remains promising. Factors such as strong domestic capital flows, proactive policy interventions, and a relatively favorable position in the global landscape foster optimism. The ongoing tariff conflict poses a significant risk that could reshape market dynamics, making it crucial for investors to stay informed and agile in their strategies.
