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Soft AUM momentum to drive modest performance

Capital Market players are likely to deliver moderate performance during Q2FY26, with the MF QAAUM increasing ~6% sequentially primarily supported by growth in the Equity MF segment. Steady monthly SIP contributions and net inflows are expected to drive growth amid a volatile equity-market environment. Against such a backdrop, RTAs are likely to report a modest performance, reflecting moderate QAAUM growth and marginal decline in yields. CAMS is likely to record sequential improvement in non-MF revenue, led by CAMS PAY. For KFINTECH, the issuer solutions business is expected to see healthy growth sequentially, whereas the international business revenue growth is likely to remain modest in the quarter. EBITDA margin for both—CAMS and KFINTECH—is expected to improve sequentially. A sequential decline in Cash ADTO and moderate growth in derivatives ADTO during the quarter may weigh on broking- and transaction-based revenue across segments of Motilal Oswal. However, the Asset Management business is expected to perform well driven by healthy AUM growth. Overall, we expect Motilal Oswal’s operating revenue/PAT to grow ~3%. Despite the recent weakness in capital-market stocks amid the volatile market conditions, we maintain a constructive view on the long-term structural growth prospects of the industry. Any near-term correction in stock prices should offer attractive accumulation opportunities.

Modest MF AUM growth; cash ADTO declines sequentially

While SIP monthly contributions have been steady during July and August, the Equity MF AUM (including balanced schemes) has tracked a modest YoY growth path, leading to moderation in overall MF AUM growth. We expect MF QAAUM to grow ~6% QoQ during Q2FY26, with the Equity MF QAAUM expected to grow ~6% sequentially. While the growth in Equity AUM is likely to be driven by net flows, MTM losses during the quarter is likely to taper the growth. During the quarter, Cash ADTO witnessed a ~10% decline sequentially, whereas the derivatives ADTO increased ~16% sequentially.

MF AUM growth to impact RTAs; EBITDA margin to improve sequentially

While we expect MF QAAUM to grow ~6% QoQ and the AUM market share to be stable, the MF-based revenue of RTAs is likely to be impacted by the marginal decline in yields. For CAMS, the non-MF based revenue is expected to witness healthy sequential growth driven by growth in CAMS PAY; however, CAMS KRA is expected to witness some sluggishness given the slowdown in capital-market activity and new demat account additions. KFINTECH is expected to witness modest revenue growth in the international business segments owing to the integration with Ascent Fund Services. However, the issuer solutions business is likely to clock healthy revenue growth on QoQ basis, driven by new corporate additions and increased corporate actions during the quarter. Overall, revenue of RTAs is likely to witness modest growth sequentially; however, on YoY basis, the revenue growth is expected to remain weak largely owing to strong MF QAAUM growth in the base driven by strong equity markets. We expect EBITDA margin for CAMS as well as KFINTECH to improve sequentially, aided by operating leverage and cost efficiencies.

Asset Management segment continues to drive the show for Motilal Oswal

While the industry MF AUM growth is expected to remain modest, we expect Motilal Oswal Asset Management to clock healthy AUM growth, aided by healthy inflows, fund performance, and new fund launches. We expect the Asset Management segment to clock ~11% revenue growth sequentially. The decline in cash ADTO on QoQ basis is likely to impact broking revenues, interest on MTF, and transaction-based revenue streams. Overall, we expect Motilal Oswal to deliver ~3% revenue growth QoQ; however, YoY revenue growth is likely to remain subdued given the strong equity market movement in the base. While we expect largely stable margins on sequential basis, operating PAT is expected to grow ~3% on QoQ basis and stay flat on YoY basis; however, reported PAT is likely to be impacted by MTM losses in the treasury book.

We remain positive on the long-term structural growth of capital markets

Over the past few months, capital-market stock prices have witnessed some weakness owing to volatility in equity markets. Despite this, we remain constructive on the overall long-term growth of the capital-markets theme, and view any dip in stock prices as a good entry point. We roll forward our target price to Sep-26E from Jun-26.

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