Latest news with #GautamDuggad
Economic Times
31-07-2025
- Business
- Economic Times
Which sectors will need a relook in terms of earnings projection now? Gautam Duggad explains
Gautam Duggad, Head Of Research, Director - Institutional Equities at Motilal Oswal Financial Services, says stock markets are reacting maturely to tariff impacts, with major sectors like financials and IT remaining relatively stable. Earnings growth is expected to be driven by domestic economic factors and a shift towards consumption-focused policies. While large sectors face limited growth, smaller sectors such as EMS and cement are projected to lead earnings, with pharma and consumer durables also contributing. ADVERTISEMENT Forget the overall exports and the impact of tariffs should they come in at 25% on various sectors. The oil risk where things settle down with Russia seems to be a bit of a niggling worry because it is going to have a bearing on marketing margins, etc, for us. Gautam Duggad: Absolutely, that is one of the most important commodities for us and it has a bearing on multiple macro parameters, current account deficit, inflation, and obviously consequently the interest rates in the economy. We will have to keep a close eye on where the crude oil settles. But in the last 10 years, barring that one- or two-month period when crude oil spiked up to $130-140 during the Russia-Ukraine crisis in early 2022, most of the last 10 years we have seen oil behaving in a tight range. That has helped us at the margin in so far as macro parameters are concerned. So yes, we will have to keep an eye on it, but there's very little we can predict and do about it till the time things settle down. Help us understand which sectors will now need a relook in terms of the earnings projection because for now, the chemicals and textiles are taking a bit of a hit on the stock prices as well. What is your analysis? Gautam Duggad: So, sectors which add very little to the overall earnings pool are getting hit. The three or four big sectors which contribute almost 65% to 70% of the earnings pool – financials, IT, consumption, auto, and to an extent utilities are not that directly impacted by this tariff related madness. Which is why we are seeing a very mature and a calibrated reaction by stock markets. Our earnings will be a function of two or three important things like how the domestic economy behaves as the after effects of rate cuts and income tax cuts along with improved liquidity and good monsoon take shape; whether we see a pickup in high frequency indicators in early September, October and whether consumption revives because after a long time government has changed its stance and started focusing away from capex towards consumption? Consumption has almost been dead so far as low ticket items are concerned. In fact, in our model portfolio, we have made consumer staple zero for the first time in the last 10 years. Our entire weight in consumption is allocated towards consumer discretionary. Third, particularly this quarter and this year too (FY26), smaller sectors are driving the 10% growth that we are talking about. For example, in this quarter, we are expecting private banks to report an earnings decline, PSU banks to post flat numbers and it obviously has done 5-6% growth which was expected. Consumer has shown zero growth, auto a slight bit of a decline because of a decline in some of the heavy OEMs like Tata Motors, Hyundai and Maruti. So, whatever 10-11% growth that we are pencilling in for this quarter as well as the full year is being led by EMS, and cement. Cement will have a rocking quarter as well as a year after a long time, but it is well expected. Then, pharma is going to post double digit earnings and a little bit of consumer durables and some other smaller sectors. All the big sectors' performance is going to be very limited both for this quarter as well as for the full year because the big tailwind in the asset quality that we have enjoyed in the financials between FY18 to FY25 when the backing BFSI profit pool in our coverage universe went from Rs 50,000 crore to almost Rs 5 lakh crore in seven years, seems to be settling at 10-12% growth which is broadly converging with your underlying credit growth in the economy and consumption. ADVERTISEMENT Till the time it picks up, we will have this very peculiar problem with the three big sectors – banks, consumption and also largecap IT. These three sectors put together account for 55-60% of the profit pool and they are not growing beyond 7-8%. Till the time one of these sector's earnings picks up, the index earnings are going to be maybe high-single digit or low-double digit. The real alpha therefore will accrue from stock picking and within the sector also, the dispersion of earnings growth is very high. For example, if you were positive on consumption for the last four years and had allocated in HUL and ITC, you made no money. Similarly, in IT, if you were positive and allocated towards largecap IT, you massively underperformed. This may sound like a pure bottom-up stock pickers market and therefore while your sector call can be right, unless the stock call is right, you'll end up underperforming even there. ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
31-07-2025
- Business
- Time of India
Which sectors will need a relook in terms of earnings projection now? Gautam Duggad explains
Gautam Duggad , Head Of Research, Director - Institutional Equities at Motilal Oswal Financial Services , says stock markets are reacting maturely to tariff impacts, with major sectors like financials and IT remaining relatively stable. Earnings growth is expected to be driven by domestic economic factors and a shift towards consumption-focused policies. While large sectors face limited growth, smaller sectors such as EMS and cement are projected to lead earnings, with pharma and consumer durables also contributing. Forget the overall exports and the impact of tariffs should they come in at 25% on various sectors. The oil risk where things settle down with Russia seems to be a bit of a niggling worry because it is going to have a bearing on marketing margins, etc, for us. Gautam Duggad: Absolutely, that is one of the most important commodities for us and it has a bearing on multiple macro parameters, current account deficit, inflation, and obviously consequently the interest rates in the economy. We will have to keep a close eye on where the crude oil settles. But in the last 10 years, barring that one- or two-month period when crude oil spiked up to $130-140 during the Russia-Ukraine crisis in early 2022, most of the last 10 years we have seen oil behaving in a tight range. That has helped us at the margin in so far as macro parameters are concerned. So yes, we will have to keep an eye on it, but there's very little we can predict and do about it till the time things settle down. 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What is your analysis? Gautam Duggad: So, sectors which add very little to the overall earnings pool are getting hit. The three or four big sectors which contribute almost 65% to 70% of the earnings pool – financials, IT, consumption, auto, and to an extent utilities are not that directly impacted by this tariff related madness. Which is why we are seeing a very mature and a calibrated reaction by stock markets. Our earnings will be a function of two or three important things like how the domestic economy behaves as the after effects of rate cuts and income tax cuts along with improved liquidity and good monsoon take shape; whether we see a pickup in high frequency indicators in early September, October and whether consumption revives because after a long time government has changed its stance and started focusing away from capex towards consumption? Consumption has almost been dead so far as low ticket items are concerned. In fact, in our model portfolio, we have made consumer staple zero for the first time in the last 10 years. Our entire weight in consumption is allocated towards consumer discretionary . Third, particularly this quarter and this year too (FY26), smaller sectors are driving the 10% growth that we are talking about. For example, in this quarter, we are expecting private banks to report an earnings decline, PSU banks to post flat numbers and it obviously has done 5-6% growth which was expected. Consumer has shown zero growth, auto a slight bit of a decline because of a decline in some of the heavy OEMs like Tata Motors, Hyundai and Maruti. Live Events You Might Also Like: Market taking 25% Trump tariff in its stride after initial knee-jerk reaction: Gautam Duggad So, whatever 10-11% growth that we are pencilling in for this quarter as well as the full year is being led by EMS, and cement. Cement will have a rocking quarter as well as a year after a long time, but it is well expected. Then, pharma is going to post double digit earnings and a little bit of consumer durables and some other smaller sectors. All the big sectors' performance is going to be very limited both for this quarter as well as for the full year because the big tailwind in the asset quality that we have enjoyed in the financials between FY18 to FY25 when the backing BFSI profit pool in our coverage universe went from Rs 50,000 crore to almost Rs 5 lakh crore in seven years, seems to be settling at 10-12% growth which is broadly converging with your underlying credit growth in the economy and consumption. Till the time it picks up, we will have this very peculiar problem with the three big sectors – banks, consumption and also largecap IT. These three sectors put together account for 55-60% of the profit pool and they are not growing beyond 7-8%. Till the time one of these sector's earnings picks up, the index earnings are going to be maybe high-single digit or low-double digit. The real alpha therefore will accrue from stock picking and within the sector also, the dispersion of earnings growth is very high. For example, if you were positive on consumption for the last four years and had allocated in HUL and ITC, you made no money. Similarly, in IT, if you were positive and allocated towards largecap IT, you massively underperformed. This may sound like a pure bottom-up stock pickers market and therefore while your sector call can be right, unless the stock call is right, you'll end up underperforming even there.
Time of India
08-07-2025
- Business
- Time of India
Indian stock valuations trading above average, but no overheating yet: Motilal Oswal Financial Services
Valuations of Indian equities are trading above their long-term averages, indicating stocks are far from cheap at current levels. The Nifty is trading at an estimated Price to Earnings (PE) ratio of 21.7 times, above its averages for five, ten and fifteen years, according to Motilal Oswal Financial Services . The price-to-book multiple for the Nifty stands at 3 times, compared to a decade average of 2.7 times, it said. 'While valuations have crept above long-term averages, we do not consider it to be in the overheated zone,' said the brokerage's note. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Amazing Moments Captured in Perfectly Timed Photos Read More Undo The Nifty's PE ratio in September 2024, when the indices hit their peaks, was at 23-24 times. The market capitalisation-to-GDP ratio, a broad indicator of overall market valuations, is estimated at 127% for FY26, above the historical average of 87%. Agencies The measure, also known as the Buffett indicator after Warren Buffett, is down from a peak of 146% in September. The PE ratios of mid-cap and smallcap indices show their valuations are at a premium to the large-cap stocks. Motilal Oswal's head of institutional research Gautam Duggad said the firm is raising allocation to midcaps, citing superior growth. The brokerage prefers a blend of large- and mid-caps.
Economic Times
08-07-2025
- Business
- Economic Times
Indian stock valuations trading above average, but no overheating yet: Motilal Oswal Financial Services
Valuations of Indian equities are trading above their long-term averages, indicating stocks are far from cheap at current levels. The Nifty is trading at an estimated Price to Earnings (PE) ratio of 21.7 times, above its averages for five, ten and fifteen years, according to Motilal Oswal Financial Services. ADVERTISEMENT The price-to-book multiple for the Nifty stands at 3 times, compared to a decade average of 2.7 times, it said. 'While valuations have crept above long-term averages, we do not consider it to be in the overheated zone,' said the brokerage's note. The Nifty's PE ratio in September 2024, when the indices hit their peaks, was at 23-24 times. The market capitalisation-to-GDP ratio, a broad indicator of overall market valuations, is estimated at 127% for FY26, above the historical average of 87%. The measure, also known as the Buffett indicator after Warren Buffett, is down from a peak of 146% in September. The PE ratios of mid-cap and smallcap indices show their valuations are at a premium to the large-cap stocks. Motilal Oswal's head of institutional research Gautam Duggad said the firm is raising allocation to midcaps, citing superior growth. The brokerage prefers a blend of large- and mid-caps.
Economic Times
16-06-2025
- Business
- Economic Times
12-15% earnings growth likely in FY26-27; PSBs and select commodity stocks offer value: Gautam Duggad
Live Events You Might Also Like: Expect a lot of wealth creation in equity market over next 5 years: Gautam Duggad You Might Also Like: FY26 earnings growth to rebound to 12-13% for Nifty 50 companies: Varun Goel (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel , Head Of Research, Director - Institutional Equities,, says the fourth quarter of FY25 showed strong earnings. It surpassed previous quarters. Growth reached 10% against a 2% expectation. Most sectors and companies exceeded forecasts. Midcaps led with 19% earnings growth. Largecaps also posted 10% growth. Government capex spending increased significantly in March and April. Commodity prices remain a concern. Overall, a 12-15% earnings growth is expected for further says that despite a significant rally in PSU market capitalization, the PSU index's PE ratio remains elevated at 14-15, exceeding its historical average. Defence stocks are trading at high PE ratios of 40-50, limiting further rerating potential. PSU banks and select commodity stocks are the only areas within the PSU sector offering reasonable valuations.I beg to differ. Q4 was a very strong quarter. The spread, the quality, the number of beats that we have seen in this quarter we have not seen in any quarter of FY25. This is the best quarter of FY25. We have exited a very good momentum. Compared to an expectation of 2%, we got 10% growth. Out of 22 sectors for which we forecast earnings, 19 delivered numbers which are better or ahead of of 300 companies that we forecast earnings for, 220, that is roughly 75% of the coverage universe, have delivered numbers either in line or ahead of expectations. This is a far better number because this number usually is between 60% and 65%. So whichever way you slice and dice the earnings, the fourth quarter was one of the best quarters that we have had both from an absolute earnings point of view as well as the spread and quality and internals of that corporate fact, if you dig slightly deeper, out of the 10% earnings growth, midcaps earnings have grown at 19% in our coverage universe and we cover 100 midcaps. Around 85 to 90 largecaps posted 10% earnings growth. And smallcap earnings were flat, except financials. So, the fourth quarter earnings have set the pace now. We are entering FY26 with a good is a lot of support from the macros coming in. RBI delivering 100 basis point rate cut, government cutting income tax rate, inflation trending close to 3%, that leaves more room for RBI in second quarter of FY26 to cut another 25-50 basis points. Liquidity conditions are improving. GST data is strong. Your E-Way bill numbers are strong. So, 12% to 15% earnings growth is not a very far-fetched expectation to have. Yes, the sectoral mix within that 12-15% expectation that we have might change along the way. Some other sectors will contribute versus what we are thinking right broadly, I would also expect the capex cycle to revive. The large part of FY25 is spent on the slowdown in capex. But look at the March numbers. The government spent Rs 2.4 lakh crore. For context, this number was the total annual spend in FY25 which we now spend in one month. April also began on a strong note. We spent 1.6 lakh crore in capex. So, between March and April, we spent close to Rs 4 lakh crore. Slowly, capex spending will also come back might grow at 10-11% or maybe slightly higher because the government has budgeted about 10% growth for FY26 at about Rs 11.5 lakh crore; we closed at Rs 10.5 lakh crore last year versus budgeted estimate of Rs 10.2 lakh crore. Nobody would have thought that the government will exceed the capex spend for FY25 if you had asked them in February or even the first week of March. So, March came like that big slog over where the government completely achieved the target and exceeded by 2-3%.So, those are some of the contributing factors for earnings in my view. The only place where we have our reservations is on global commodities because they are completely difficult to forecast. The underlying mark to market on the commodity prices basis the moment that we are seeing in commodities that takes a huge toll on Nifty earnings because commodities contribute 20% of the profit pool. If you look at the number ex of commodities, even FY25 Nifty earnings growth is about 10%, and that is giving us the confidence that given the many parameters which are in play at both macro and micro level on consumption, capex, financials, the 12-15% earnings growth that we are projecting for FY25 to FY27 is in the realm of you look at PSUs, there are the cohorts – multiple subsegments within that. There is banking, utility, commodity and defence. If you look at defence, on July 24, the peak defence market cap was close to Rs 11 lakh crore. From there to February 25, the market cap came down to Rs 7 lakh crore, almost a 35% decline. Now between February to June that is a four-month period, the market cap has crossed the previous high of Rs 11 lakh it is almost trending towards Rs 11.5-12 lakh crore. So, there has been a 70% increase in market cap in four months for defence PSUs. A large part of the defence market cap is contributed by PSUs. In the same breath, railways have had a phenomenal rally from 2021 to 2024. The combined market cap of a railway plus defence used to be Rs 2 lakh crore in July '21. It went to Rs 18 lakh crore in July '24. From there, both the sectors had that, defence has rallied and crossed its earlier peak but the Railways is still to cross it. PSU banks have been flatlining for almost a year now. So, where are we positive? We are positive on select PSU banks, which is why I am still overweight on PSUs in our model portfolio in financials, even though our bigger overweight stems from non-lending financials and capital market plays where we are far more bullish. Then, selectively in commodities, we like Coal India, Power Grid. One cannot have a basket approach because of the underlying undervaluation of PSUs prevailing in 2020. A large part of that got corrected between 2020 and 2024.A year-and-a-half back, we had detailed in the PSU strategy note where we said that despite the big rally in the market cap for PSU companies, the PSU index was still trading at 14-15 PE while its average used to be eight-nine times. I do not think the PE has more room for rerating, even in defence stocks now because now even defence stocks are trading at 40-50 PE. The only place where valuations are reasonable in PSU space today is PSU bank and some commodity stocks.
