Motilal Oswal Financial Services has identified 26 stocks with potential for earnings growth following a market correction that saw the Nifty-50 slip 12% from its September 2024 peak. The brokerage notes that consistent domestic inflows of $177 billion over the past two years have offset heavy foreign selling, creating a more sustainable environment for investors to review valuation gaps.
The Indian stock market has undergone a significant valuation reset as the Nifty-50 index sits 12% below the peak reached in September 2024. Motilal Oswal Financial Services reports that this consolidation phase has reduced valuation multiples, with large-cap stocks correcting by 29% and mid-cap stocks by 27% from their previous highs. With the Nifty-50 currently trading 16% below its long-term average, the firm suggests that current levels offer a more reasonable entry point for those tracking long-term trends, though investor caution remains necessary due to ongoing macroeconomic volatility.
A notable feature of this period has been the structural shift in market liquidity. While foreign institutional investors (FIIs) have been net sellers, pulling out $56 billion from Indian equities over the last 24 months, domestic institutional investors (DIIs) have acted as a buffer. Domestic investors have injected $177 billion into the market during the same two-year span. This absorption of sell-side pressure has been supported by consistent monthly contributions through systematic investment plans, which now cross ₹30,000 crore, providing a foundation that helps stabilize the market despite global uncertainty.
Selected High-Conviction Picks
Following its analysis of resilient earnings growth, Motilal Oswal has highlighted a list of 26 stocks categorized by their index inclusion. Within the Nifty-50, the brokerage points to Bharti Airtel, ICICI Bank, State Bank of India, Titan, Adani Enterprises, Mahindra & Mahindra, Bharat Electronics, Hindalco, Shriram Finance, Interglobe Aviation, and Apollo Hospitals. These companies are noted for their ability to maintain earnings stability even as the broader market deals with valuation cooling.
Outside the Nifty-50, the list includes a range of growth-oriented companies such as TVS Motor, BSE, GE Vernova T&D, Indian Hotels, Dixon Technologies, and Coforge. These selections represent a mix of sectors where the brokerage anticipates earnings resilience to continue even during periods of market consolidation.
For investors, the primary monitorable remains the actual earnings performance of these companies. While a valuation correction often makes stocks appear more attractive, the final benefit depends on whether these firms can continue to grow their profits in line with expectations. Investors may track upcoming quarterly results and management commentary on future demand, as these factors will determine whether the identified growth potential translates into actual financial outcomes. The interplay between sustained domestic inflows and the volatility in foreign flows will also remain an important factor for market stability in the coming quarters.