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Corporate earnings in the first quarter of FY22 have been in line with the elevated expectations, said Motilal Oswal Financial Services Limited (MOFSL).

According to MOFSL, Q1FY22 earnings were supported by the deflated base of Q1FY21 along with localised as well as less stringent lockdowns.

"Q1FY22 earnings have been in line with our expectations, led by cyclical sectors such as metals and oil and gas, benefitting from high commodity price realisations," MOFSL said.

"Large private banks' earnings have indicated a sequential increase in asset quality pressure, led by the retail segment. Private banks' earnings have grown 29 per cent YoY," it said.

"Corporate commentaries have indicated improved economic recovery and demand since June 2021. Raw material price inflation has impacted sectors such as auto, consumer staples and consumer durables -- companies have taken price increases to pass on some of the raw material price increase," it added.

Besides, the MOFSL said that amid the buoyant sentiments, elevated activity in primary markets, Nifty valuations stood at '21x12m', while forward EPS remains rich and thus consistent delivery on earnings expectations going ahead becomes crucial.

"We remain 'OW' on BFSI, IT, metals, cement and capital goods; 'Neutral' on consumer, auto and healthcare; and 'UW' on telecom, energy, and utilities," it said.