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Equity markets after five consecutive months of decline, bounced back smartly in Mar’25, on the back improving domestic macros, FII buying and short covering in F&O space. Nifty gained 6.3% MoM – it’s highest monthly gains since Jul’24. The broader market outperformed with Nifty Midcap 100 rising by +7.8% and Smallcap 100 jumping 9.5%.

India’s retail inflation eased to seven-month low of 3.61% in Feb’25, down from 4.31% in Jan’25. The industrial output (IIP) growth was above expectation at 5% YoY in Jan’25 against 3.2% in December. The US inflation fell to 2.8% in February, below January’s 3% and the market expectation of 2.9%.

FIIs turned marginal buyers in Mar’25, ?2,014 crore in the secondary market – after 5 consecutive months of outflows. DII inflows remained positive at ?37,586 crore.

In the much-awaited event – US President Donald Trump announced reciprocal tariff on imports from 185 countries on 2nd April – escalating trade tensions and fears of an economic slowdown. US Dow fell over 9% over the next 2 days post this announcement, spiralling into a sell-off in global equites.

Nifty corrected by ~17% so far (till 7th April) from its peak in the last 6 months. This correction is mainly attributed to modest 9MFY25 earnings growth (Nifty EPS grew 4% in 9M), continuous FII selling since Oct’24 and a challenging global backdrop. While 4QFY25 is likely be another weak quarter, expectations for FY26 earnings are still elevated and could see downgrades, in our opinion.

We estimate the MOFSL Universe/Nifty-50 earnings to grow 1%/2% YoY in 4QFY25. The overall modest earning is expected to be anchored by Metals (+24% YoY), Telecom (loss to profit), Healthcare (+11%), Tech (+6%) and BFSI (+2%). In contrast, earning is likely to be weakened by O&G (-25%), Real Estate (-16%), and Cement (-14%). Overall, we expect Nifty earnings to grow by 5% in FY25 and 14% in FY26 to ?1,017/?1,157

We remain biased toward large-caps in this volatile environment. On sectoral front, we are positive on Financials, Domestic Consumption including travel, hospitality, durables, Industrials and suggest avoiding globally exposed sectors like IT, pharma, metals.

Equity Investment Ideas

? HDFC Bank is focused on resolving post-merger challenges via deposit mobilization and balance sheet rebalancing, driving an expected ~11%/15% loan/deposit CAGR over FY25-27.

? NIMs stabilizing at 3.4% in 3Q with gradual recovery to ~3.5-3.6% by FY27E as high-cost liabilities phase out and loan mix shifts toward higher-yielding assets.

? Strong asset quality with GNPA/NNPA at 1.4%/0.4%, supported by a provision buffer of INR262b (1.1% of loans), ensuring resilience against credit risks.

? We expect RoA/RoE of 1.8%/14.1% by FY27E, reflecting steady growth prospects & disciplined risk mngtt for long-term investors.

Buy HDFC Bank CMP : 1,769 TARGET : 2,100

? Lemon Tree Hotels is poised for sustained growth, driven by the stabilization of Aurika Mumbai, timely portfolio renovation, and strong pipeline of ~5,879 rooms under management contracts.

? Recent additions in Vrindavan and Navsari reflect continued brand expansion & is expected to support healthy occupancy and ARR improvements, leading to op. leverage benefits.

? We estimate a 16%/34% revenue/adj. PAT CAGR over FY24–27, with RoCE improving from ~10% in FY24 to 19% by FY27. The asset-light strategy and rising share of managed properties will support margin expansion and scalability

Buy Lemon Tree CMP : 139 TARGET : 190

? Max Healthcare (MAXH) is a leading hospital chain with strong market presence, focusing on multi-specialty tertiary care & diagnostics. It is expanding aggressively through brownfield and greenfield projects.

? MAXH plans to add over 3,600 beds in the next 3-4 years. Acquired Jaypee Hospital to enhance its North India footprint.

? Increased govt funding for medical infra, insurance penetration & PLI scheme for medical devices will drive PPP, enhance patient volumes, & reduce equipment costs.

? We expect a 17% revenue CAGR over FY25-27

Buy Max Healthcare CMP : 1,073 TARGET : 1,301

? Brent Crude has fallen to its 4-year low at $60 per barrel amid US-China trade tensions and rising supply, benefitting lubricant players like Castrol, potentially leading to improved profitability.

? As part of its future plans for advanced EV & data center testing, Castrol opened technology center in Patalganga, equipped with blending & testing capabilities. For its lubricant business, it is targeting above industry average growth rate of 4-5%.

? Mngt is optimistic about India’s lubricant demand potential, driven by low car penetration. Castrol's focus on brand building, distribution, and new products supports its market leadership. We estimate ~23% EBITDA margin for CY25 and CY26.

Buy Castrol CMP : 194 TARGET: 260

Technical& Derivatives Outlook

• Nifty index has corrected by over 1000 points in April so far due to global tensions and is currently trading below the key 22,800 marks. The recent weakness is largely driven by global headwinds and rising concerns over a potential tariff war, which has triggered selling pressure and sharp intraday volatility. The bears have taken control and the index is struggling to hold its key support levels. India VIX has jumped over 50% in the past few sessions, showing increased fear and uncertainty among traders due to global news. On the sectoral front we have witnessed buying interest in the Financial, Private Banks, FMCG while short built up is seen in the Metal, IT, Pharma, Energy and Auto.

• Technically, index has formed a Bearish candle. On weekly chart, Nifty is forming lower highs - lower lows. Now till Nifty holds below 22800 zones, weakness could be seen towards 22000 then 21700 zones whereas resistances have shifted lower to 22700 then 23000 zones.

 

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