Loss of profit convenience, Motilal Oswal sees a better prospect for Nifty shares

Indian shares can finally turn an angle after months of downward revisions, according to Motilal Oswal Financial Services, which says that the worst profit reductions are probably left behind. The brokerage noted that “a better profit cycle, decent ratings and a base of underperformance formed the stage for potential up-move in market and valuation extension for the Indian markets.”

For the quarter ending in June (1qfy26), the aggregated profit and post-tax reductions for the Motilal Oswal coverage universe was only 2% for FY26 and 1% for FY27, compared to 6%, 3% and 4% cuts in previous quarters.

Excluding benches and raw materials, the downgrade was negligible by –0.2% for FY26, while FY27 saw an upward revision of 0.4%. Mid-caps even placed upgrades of 4% and 2% for FY26 and FY27 respectively, although small caps kept wearing steep cuts at 8%.

“FY26 Pat/EPS estimates for our universe/nifty have been cut since 1qfy25 with ~ 13%/~ 16%, which implies that a material part of the downward overhaul is lagging behind,” said the brokerage.

Policy support in Focus

Motilal Oswal attributed optimism to a supporting policy background. The RBI has reduced the repo percentage by 100 basic points to 5.5% and is set to reduce the cash reserve ratio in phases to 3%. “Policy makers in a ‘whatever’ mode ‘have also pushed the liquidity in the surplus, have reduced GST rates and have reduced the income taxes to lift disposable income.

“GST2.0 has the potential to start a consumption cycle and probably to be a profit kicker for India Inc,” noted the report, adding that lower prices can stimulate the question and margin expansion through operational loom operation

The divergence of the sector will continue to exist

The relaxation trend has been wrong. Cars, insurance, capital goods, cement and consumer points saw stabilization, while technology, PSU banks, metals and retail storage continued to register sharper cuts. Private banks were also busy on the estimates of the FY26, although Motilal Oswal expects credit growth in the second half to revive.

Prospects and risks

For FY26, the Brokerage projects project the winning growth of 13% for its universe and 10% for Nifty, with FY25-27 CAGR expected in 15% and 13% respectively.

However, it warned that “important risks are a lower than expected advantage of government actions in the total question of or a further geopolitical risk -rising risk event.”

Top sharing choice includes Bharti Airtel, Icici Bank, L&T, Sun Pharma, Ultratech, Titan, Tech Mahindra, Bel, TVS Motors and Indian Hotels on the Grote Cap-Kant, and Dixon, SRF, Suzlon, Cofors.

Read also | Yes bank shares collect 10% in 1 month as Sumitomo UPS interest. Analysts Eye RS 25, is it a purchase?

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)