Skilled view: Manufacturing, capital items to stay high-growth sectors in 2025, says Motilal Oswal Fund Supervisor

Skilled view: Except a revival in company earnings, the brand new 12 months might be muted for the Indian inventory market, says Santosh Kumar Singh, Fund Supervisor at Motilal Oswal Mutual Fund. In an interview with LiveMint, Singh discusses key triggers for the marketplace for 2025 and which sectors can generate alpha.

Edited excerpts:

Did the Indian inventory market meet your expectations in 2024?

Indian inventory market has executed fairly effectively in calendar 12 months 2024 (CY24), with the Nifty up virtually 14 per cent. 

The primary three quarters of the 12 months had been good from an earnings perspective, with earnings broadly according to expectations. 

Nonetheless, the September quarter upset barely. Therefore, purely from a inventory worth perspective, the markets have delivered regardless of the correction we noticed from the all-time highs.

Do you anticipate the approaching 12 months to be higher or weaker than 2024? What are the important thing triggers that may transfer the market in 2025?

With the inventory costs shifting up at a sooner tempo than EPS (earnings per share) progress within the final 4 years, we’d anticipate the calendar 12 months 2025 (CY25) to be barely muted in comparison with the previous few years. 

We now have already seen Q2FY25 outcomes being very average, with the EPS progress of round 8 per cent for BSE500 (excluding oil advertising firms) firms. 

That is in sharp distinction to greater than 20 per cent progress in FY24. Prime-line progress has been moderating for a number of quarters, with BSE 500 (excluding oil advertising firms) firms’ progress being sub-10 per cent for nearly six quarters. 

Therefore, until we see a pointy restoration in earnings, which isn’t seen but, we might even see CY25 be muted from a inventory worth efficiency perspective. The revival in earnings progress can be a key set off for the market.

What must be our funding technique in 2025?

In 2025, traders must be extra picky. In good instances, every part tends to go up; nonetheless, when the returns transfer to lifelike numbers, traders must be way more bottom-up and make investments primarily based on the corporate’s fundamentals. 

Therefore, for FY25, we have to observe our high quality, progress, longevity, and worth (QGLP) technique way more stringently. We’ll nonetheless discover high-growth sectors and themes, and we are going to maintain focussing on that.

In your view, what areas have excessive progress potential? Which sectors can generate alpha?

Manufacturing could stay a high-growth sector in 2025 as effectively, provided that governments concentrate on this explicit phase.

We might anticipate the federal government to concentrate on capex to stay; therefore, capital items firms could keep excessive progress.

Apart from these two segments, I might consider that after a few years of hiatus, BFSI ought to make a return as many of the BFSI shares aside from capital market-linked ones are buying and selling at multiples beneath their long-term common.

There are a number of triggers to this phase: (a) we anticipate financial insurance policies to develop into extra accommodative as we’re already seeing a moderation in GDP progress, (b) We might even see a secure NIM (internet curiosity margin) from hereon, and (c) in my opinion, many of the ache from the unsecured e book is already within the worth, and as soon as we see that e book recovering we might even see the inventory performing very well.

India’s GDP has been moderating for 3 consecutive quarters. Is it time to be cautious about home themes?

GDP progress in Q2FY25 moderated to five.4 per cent from 8.1 per cent in Q2FY24 on a year-on-year (YoY) foundation. This was decrease than the RBI estimate of seven per cent.

The slower tempo of progress was throughout sectors, together with authorities spending, exports and imports. GVA progress additionally moderated to five.6 per cent.

There are expectations that the second half might be significantly better as the federal government capex could choose up, and so would agricultural progress.

Nonetheless, one must be cautious as we’re not seeing any revival in consumption but. We could wish to be cautious about a number of the segments of the markets.

Nonetheless, we nonetheless see a number of themes like capital items, manufacturing, and many others., rising shortly and offering many bottom-up funding alternatives.

India Inc.’s earnings within the first half of FY25 have been weak. Ought to we anticipate a restoration from Q3 or This autumn?

As highlighted earlier, the primary half noticed a single-digit progress in earnings for BSE 500 (excluding oil advertising firms) and began monitoring according to the topline progress fee. 

Consensus earnings had been downgraded by virtually 3 per cent for these firms. 

We’re but to see information units that recommend we’re seeing a revival in earnings. 

Nonetheless, the expectation is that pushed by authorities capex and different expenditures, a greater crop season could result in a restoration in earnings in Q3 and This autumn.

How ought to we play the mid and small-cap segments now? Are valuations nonetheless at uncomfortable ranges in these segments?

Mid and small-cap should not homogeneous, so we won’t remark broadly. 

Among the segments in mid and small-cap appear to be overheated. Nonetheless, a number of segments, particularly within the BFSI area, are low-cost. 

Having stated that, the revenue progress of this phase, after outpacing giant caps in FY24, has began to converge, and therefore, the present valuations on an general foundation nonetheless appear excessive. 

Nonetheless, as now we have identified, mid- and small-caps are typically bottom-up segments; therefore, we see a whole lot of high-growth alternatives out there.

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Disclaimer: The views and proposals above are these of particular person analysts, specialists, and brokerage corporations, not Mint. We advise traders to seek the advice of licensed specialists earlier than making any funding choices.