Volatility either behind us or largely priced in, investor focus should now shift from `Events to Earnings`: Motilal Oswal Private Wealth
According to May 2025 Alpha Strategist Report by Motilal Oswal Private Wealth (MOPW), with much of the event-driven volatility either behind us or largely priced in, investor focus should now shift “From Events to Earnings”. Early Q4 results suggest improving corporate performance, and a 14% CAGR in Nifty EPS over the next two years is expected. Valuations for large caps (Nifty 50) have moved from attractive to fair following the recent rally, so return expectations should be moderated. While mid and small caps continue to trade at a premium relative to long-term averages, selective opportunities are beginning to emerge in these segments.
MOPW believes India appears relatively better positioned. Indicators like a falling 10-year yield, a relatively stable rupee, contained inflation, and continued fiscal discipline support a constructive outlook. Despite some slowdown concerns, record-high GST collections in April (up 12.6% YoY), a rising manufacturing PMI, and robust export data point to a potential pickup in economic activity. FII flows have turned net positive for two consecutive months, reflecting renewed investor confidence.
Considering the recent developments, for equity investments, a lump sum approach in Hybrid, Large Cap, and Flexi Cap funds, for Mid and Small Cap strategies, a staggered investment approach over the next 2–3 months is advisable, with any market pullback offering an opportunity for more aggressive deployment is recommended. In fixed income, a benign inflation trend and growth concerns have allowed the RBI to pivot towards supporting the economy.
The Indian 10-year G-Sec yield has been stable and gradually declining, supported by favorable demand-supply dynamics and easing inflation. RBI measures like OMO purchases, term repo auctions, and USD/INR swaps have improved liquidity. With surplus liquidity and rate cuts softening yields across maturities, the yield curve has begun to steepen. In this context, MOPW favors accrual strategies, as current long-term yield levels are not compelling for duration plays.
Lastly, while gold reached all-time highs in April amid global uncertainty, it now appears stretched, as some of that uncertainty has eased. From an asset allocation perspective, MOPW maintains a neutral stance on gold.
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