Apart from the valuations part, the brokerage has also cherry picked a number of stocks across the sectors, which might outperform in the remaining part of the year.
The Nifty50 index was among the top laggards, dropping about 3 per cent during the month of May, registering the second biggest decline after Russian markets, which plunged 7 per cent.
MSCI India is trading at an 87 per cent premium to MSCI EM, above its historical average of 61 per cent in P/E terms. Over the last 12 months, MSCI India, which has gained 7 per cent, has outperformed MSCI EM, which has dropped 22 per cent.
Even after, Indian equities have been trading at 19.2x FY23E earnings. All key markets continued to trade at a discount to India.
According to the report from Motilal Oswal, India’s share in the world Mcap stood at 3.1 per cent, above the historical average of 2 per cent. India is among the top-5 contributors to world m-cap. Top-10 accounts for 80 per cent of the global m-cap.
Corporate earnings remained strong in 4QFY22, however it was concentrated, where auto and consumer were only gainers. On the other hand, metals, utilities, Oil & gas registered double digit cuts, the report said.
Among the Nifty50 constituents, M&M, Britannia, Hero Motocrop, SBI Life and Dr Reddy’s Labs gained between 6-12 per cent, whereas JSW Steel Divis Labs, Tata Steel, Grasim and
plunged 15-24 per cent in the month of May.
Motilal Oswal prefers largecap stocks over the midcap peers as it finds more value in the larger companies, compared to richly priced second rung peers.
During the last 12 months, midcaps have risen 10 per cent while smallcaps declined by a per cent, compared to a 6 per cent rise in Nifty50, the brokerage said in its report.
The Nifty trades at a 12-month forward P/E of 18.7x, at a 4 per cent discount. P/B, at 2.9x, is at an 11 per cent premium to its historical average.
The study reveals that midcaps are trading at premium, whereas smallcaps are at discount. In P/E terms, the Nifty Midcap 100 trades at an 18 per cent premium to large-caps at 22.2x. Nifty Smallcap 100 trades at a discount of 18 per cent to largecaps at 15.4x.
The report added that half of the Nifty50 companies are trading a premium to their historical averages. The list includes
(57 per cent), (52 per cent), Titan (38 per cent), Tata Consumer (33 per cent) and Infosys (32 per cent).
Among those, which are trading at a significant discount, ONGC (70 per cent), Tata Steel (59 per cent), Coal India (52 per cent), JSW STeel (37 per cent) and
(31 per cent) are the top names.
From the largecap stocks, Motilal Oswal has picked Reliance Industries, Infosys, ICICI Bank, SBI,
, , , M&M, Hindalco, , and Apollo Hospitals.
It is bullish on Chola Investment and Financials,
, , L&T Technology, , , GR Infraproject, Angel One, , and Lemon Tree Hotel from mid and smallcaps stocks.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
