IGI Logo

Strategy

Market continues its winning streak; Nifty closes above 25k in Jun’25

* Nifty closes above 25k after nine months: The Nifty ended higher for the fourth successive month in Jun’25 (+3.1% MoM) to close above 25k after Sep’24 (to 25,517). Notably, the index continued to remain volatile and hovered around 1,196 points before closing 766 points higher. The Nifty is up 7.9% in CY25YTD. The Nifty Smallcap 100 (+6.7% MoM) and Nifty Midcap 100 (+4% MoM) outperformed the Nifty-50 during the month. Over the last 12 months, largecaps and midcaps have gained 6% and 7%, respectively, outperforming smallcaps, which have risen 4%. During the last five years, midcaps (CAGR: 32.4%) have significantly outperformed largecaps (CAGR: 19.9%) by 158%, while smallcaps (CAGR: 32.8%) have markedly outperformed largecaps by 165%.

* FIIs record inflows for the fourth consecutive month: FIIs were net buyers for the fourth consecutive month, investing USD2.4b in Jun’25. DIIs also showed healthy inflows, amounting to USD8.5b in Jun’25. FII outflows from Indian equities have reached USD8.2b in CY25YTD vs. outflows of USD0.8b in CY24. DII inflows into equities remain robust at USD41.5b in CY25YTD vs. USD62.9b in CY24.

* All major sectors end higher in Jun’25: Among the sectors, Telecom (+6%), Infrastructure (+5%), Technology (+4%), Real Estate (+4%), and Metals (+4%) were the top gainers MoM, while Consumer (-1%) was the only laggard. The breadth was favorable in Jun’25, with 39 Nifty stocks ending higher. Jio Financial (+14%), Grasim (+12%), Eternal (+11%), Shriram Finance (+11%), and Trent (+10%) were the top performers, while Tata Motors (-4%), Bajaj Auto (- 3%), HUL (-2%), Hero Motocorp (-2%), and Coal India (-1%) were the key laggards.

* Major economies end higher in Jun’25: Among the key global markets, Korea (+14%), Japan (+7%), MSCI EM (+6%), the US (+5%), Taiwan (+4%), India (+3%), China (+3%), and Brazil (+1%) ended higher MoM in local currency terms in Jun’25. However, Indonesia (-3%), Germany (-0.4%), and the UK (- 0.1%) ended lower MoM. Over the last 12 months in USD terms, the MSCI India Index (+1%) has underperformed the MSCI EM Index (+13%). Over the last 10 years, the MSCI India Index has notably outperformed the MSCI EM Index by a robust 90%. In P/E terms, the MSCI India Index is trading at a 74% premium to the MSCI EM Index, slightly below its historical average premium of 80%.

* Earnings – Corporate profit-to-GDP standing tall at a 17-year high!: In 2025, the corporate profit-to-GDP ratio for the Nifty-500 Universe remained at 4.7%, marking a 17-year high. Notably, for listed India Inc., the ratio stood at 5.1%, at a 14-year high. The sustained profit-to-GDP ratio for the Nifty-500 was positively influenced by sectors such as Telecom (which shifted from being a negative contributor for the past seven years to a positive contributor in FY25), PSU Banks (with a 0.07% increase in the ratio), Healthcare (a 0.04% rise), Consumer (a 0.04% increase), Metals (a 0.03% rise), and Infrastructure (a 0.2% increase). In contrast, sectors that experienced a decline in the ratio included Oil & Gas (a 0.28% decline), Automobiles (a dip of 0.03%), Cement (a decline of 0.02%), Utilities (a dip of 0.02%), Private Banks (a decline of 0.01%), and Retail (a dip of 0.01%; Detailed report).

* Our view: Amid geopolitical tensions and slowing global growth, India’s macroeconomic outlook presents a contrasting picture. India’s nominal GDP grew 9.8% in FY25, surpassing market expectations, and is projected to accelerate further to 10.8% in FY26. Although corporate profit growth moderated in FY25 due to a high base set in FY24, a slowdown in government spending during 1HFY25 amid elections, weak consumption, and volatile exports led by global uncertainties, we expect a gradual recovery ahead. The market has rebounded notably over the last three months, completely reversing its YTD decline. Currently, the Nifty is trading 7.9% higher in CY25YTD. With this rally, the Nifty trades at 22.5x FY26E earnings, near its LPA of 20.7x. Our model portfolio stance remains unchanged, with a distinct bias towards largecaps and domestic plays, given the current volatile backdrop. We are OW on BFSI, Consumer Discretionary, Industrials, Healthcare, IT, and Telecom, while we are UW on Oil & Gas, Cement, Automobiles, Real Estate, and Metals.

* Top ideas: Largecaps – Reliance Industries, Bharti Airtel, ICICI Bank, L&T, Kotak Mahindra Bank, Titan, M&M, Trent, and Tech Mahindra; Midcaps and Smallcaps – Indian Hotels, HDFC AMC, BSE, Suzlon Energy, Dixon Tech., SRF, Jindal Stainless, Coforge, Page Industries, Kaynes Tech, and LT Foods.

India’s share of the global market cap at 4%, after touching a 16-month low in Feb’25

Deep-dive

Technology: Uncertainty persists, but eyes are on 2Q deal flow and GenAI uptick

* Demand environment remains uncertain, with spending patterns broadly unchanged. We believe that current geopolitical and macro risks continue to keep recovery range-bound. This uncertainty has made global enterprises cautious as they await the macro challenges to moderate before they start funding the large transformation and discretionary-led programs. While deal signings remained subdued, widespread project deferrals or ramp-downs were largely avoided.

* The real focus now shifts to 2Q deal signings and commentary on GenAIdriven programs. While discretionary budgets remain under pressure, client interest in high-ROI tech initiatives is improving. Further, the impact of the tariff-related pause turned out to be milder than initially feared. This is also reflected in the recent recovery in Indian IT stock prices, with the broader market indicating that concerns around US tariffs have been largely digested.

** Margins are likely to stay range-bound – soft supply-side pressures help, but seasonal costs (e.g., visas) and sluggish revenue growth limit upside. We believe a sector-wide re-rating still hinges on a fresh tech cycle and earnings upgrades. Early signs of improving deal win rates, particularly in midcaps, coupled with supportive macro (potential rate cuts, stable dollar) could revive sentiment.

* The one-year forward P/E for IT stocks (MOFSL Universe) stands at 24.8x. Tier-2 stocks are at 33x, a ~30% premium to the Tier-1 pack (25x). Among Tier-1 players, HCLT (25x 1-yr fwd) is one of the key beneficiaries of having all-weather business mix, which should support its growth in the current environment. Its investments in next-gen platforms also position it well for a recovery in client spending. In Tier-2 stocks, we prefer COFORGE (39x 1-yr fwd), given its strong offerings in BFS and insurance should enable it to participate in a demand recovery, and a strong TCV also indicates a robust near-term growth outlook

Indian equities

Nifty closes above 25k; adds 766 points (+3.1% MoM) in Jun’25

* The Nifty closed higher for the fourth successive month in Jun’25 (3.1% MoM gain) to close above 25k after Sep’24 to 25,517. Notably, the index continued to remain volatile and hovered around 1,196 points before closing 766 points higher. The Nifty is up 7.9% in CY25YTD.

* All major sectors ended higher – Telecom (+6%), Infrastructure (+5%), Technology (+4%), Real Estate (+4%), and Metals (+4%) were the top gainers MoM, while Consumer (-1%) was the only laggard.

Indian equities

Breadth favorable in Jun’25; 39 Nifty companies end higher MoM

* Best and worst Nifty performers in Jun’25: Jio Financial (+14%), Grasim (+12%), Eternal (+11%), Shriram Finance (+11%), and Trent (+10%) were the top performers, while Tata Motors (-4%), Bajaj Auto (-3%), HUL (-2%), Hero Motocorp (-2%), and Coal India (-1%) were the key laggards.

* Best and worst Nifty performers in CY25YTD: Bharat Electronics (+44%), Bajaj Finance (+37%), SBI Life Insurance (+32%), HDFC Life Insurance (+32%), and Bajaj Finserv (+31%), have been the top performers, while TCS (-15%), Infosys (-15%), Trent (-13%), Wipro (-12%), and Sun Pharma (-11%) have been the key laggards.

Nifty’s valuation above its historical average

* The Nifty is trading at a 12-month forward P/E ratio of 21.7x, above its LPA of 20.7x (at a 5% premium). In contrast, its P/B of 3.2x represents a 14% premium to its historical average of 2.8x.

* The 12-month trailing P/E for the Nifty, at 24.5x, is above its LPA of 22.8x (at a 7% premium). At 3.6x, the 12-month trailing P/B ratio for the Nifty is above its historical average of 3.1x (at a 15% premium).

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412