Commenting on the theme, Gautam Duggad of Motilal Oswal said, “Metals and oil & gas provided additional momentum, but even ex-commodities earnings growth was 12%. This is the sixth consecutive quarter of high earnings growth, rising from 10% to 16% over the period. Of the 27 sectors, 19 delivered double-digit growth, which is encouraging.”
“Strong earnings came from auto, capital goods, NBFCs and PSU banks. Lending to NBFCs grew by almost 30%, non-lending banks by 35%, and PSU banks delivered 18% growth against an expected 5-6%. Even IT and retail showed healthy growth.”
He also highlighted the recovery of small caps: “Small caps grew almost 30% after five quarters of zero or negative figures. Midcaps excluding commodities grew 20%, significantly slowing the pace of earnings declines.”
Market sentiment and valuation concerns
Duggad noted, “India has underperformed in dollar terms over the last 15 to 18 months. Largecaps are fairly valued, but midcaps and smallcaps still need selectivity: the midcap index trades 28 times, smallcap 24 times. Volatility comes from trade deals, IT and AI disruption, but fiscal and monetary moves by the government and the RBI are now reflected in earnings, especially in the auto and consumer goods sector.”
IT disruption and uncertain valuations
On IT valuations, Duggad said, “We upgraded IT in November but Infosys fell 15-17% soon after. It has now returned to around 1300. Near-term levels remain uncertain.”Narrow useful contributions mask a broader power
Discussing Nifty’s gains, he added, “Finance, Consumer and IT account for 60% of Nifty’s gains. With these sectors growing only 3-10%, the overall Nifty growth of 7-8% is concentrated in a few stocks. A broader coverage shows 16% growth, highlighting strong opportunities in mid and small caps. This is truly a stock picking market.”
#Midcaps #offer #attractive #opportunities #volatility #Gautam #Duggad