Motilal Oswal Financial Services has reallocated 400 basis points from large-cap stocks to mid- and small-cap securities in its model portfolio. According to reports from The Financial Express, the brokerage remains overweight on diversified financials, automobiles, new-age technology platforms, manufacturing and industrials, and consumer discretionary sectors. The firm is underweight on private banks, consumer staples, energy and telecom, while maintaining a neutral stance on healthcare.
The brokerage expects aggregate profit after tax for its 399-company universe to rise 22% year-on-year in Q2FY27, marking the strongest growth in 11 quarters. As reported by The Financial Express, the Nifty 50 is projected to post 27% year-on-year earnings growth in Q2FY27, the highest in 17 quarters. The earnings are likely to be anchored by financials, led by banks (private and PSU, NBFCs), metals, oil and gas excluding oil marketing companies, and telecom. Financials, metals, oil and gas excluding oil marketing companies, and telecom are expected to account for much of the earnings growth, with metals projected to grow 44% and telecom profit expected to jump 71%.
According to The Financial Express, the Nifty 50, Nifty Midcap 150 and Nifty Smallcap 250 had fallen 14%, 2% and 3% respectively from their September 2024 peaks on a two-year basis. The 12-month forward price-to-earnings multiple for the Nifty 50 stood at 17.2 times, 18% below its long-period average. The corresponding multiple for the Nifty Midcap 150 was 22.8 times, 8% below its 10-year average, while the Nifty Smallcap 250 was at 23.2 times, still 25% above its long-period average. However, markets have become significantly cheaper with large- and mid-cap valuations correcting 31% and 36% from their peaks respectively, as reported by The Hindu BusinessLine. The Nifty 50 now trades 18% below its long-term average price-to-earnings multiple, while India's premium over emerging markets has narrowed sharply to 35% against a long-term average of 72%.
Motilal Oswal has increased the weight of new-age technology platforms by 100 basis points, adding Meesho and PhysicsWallah to the portfolio while trimming Eternal. Within manufacturing and industrials, the firm remains overweight on defence and electronic manufacturing services. The model portfolio includes major allocations such as ICICI Bank at 8%, HDFC Bank at 4%, Infosys at 4%, Bharti Airtel at 4%, and Reliance Industries at 4%. The brokerage has also added Adani Enterprises, raising the combined weight of commodities, utilities and renewables by 200 basis points.
According to The Financial Express, Motilal Oswal expects profit after tax for its universe to grow 15% in FY27 and 17% in FY28. The brokerage's model portfolio has an overall projected profit after tax growth of 13% in FY26, 19% in FY27 and 14% in FY28, implying a 17% compound annual growth rate over FY26-FY28. The gains are broad-based with large-caps expected to post 23% PAT growth, mid-caps 11% and small-caps 29% in Q2FY27. Looking ahead, MOFSL projects Nifty 50 PAT growth of 17% in FY27 and 13% in FY28. The improved risk-reward profile makes a case for selective stock-picking, though the brokerage cautioned that any sustained rally will depend on the direction of global interest rates, FII flows and crude oil prices.
