January 2025

India Strategy

BSE Sensex: 78,139

Refer to our recent Strategy

report on fundraising

Nifty-50: 23,645

On cloud 9 with a tinge of grey!



CY24: A look back – Thriving in turbulent times

India – the cynosure of all eyes…:

As CY24 wraps up, Indian markets have once

again celebrated a year of gains, marking a historic milestone with nine

consecutive years of positive returns. The last three years have been

remarkable, as domestic markets have navigated through global hurdles, all

while facing significant selling from FIIs.

…against all odds:

Both the global and Indian markets faced significant

challenges in CY24, including geopolitical headwinds, regulatory tightening, a

minor setback for the NDA in the Lok Sabha elections, mixed state election

outcomes, increased capital gains taxes, a strengthening USD, persistent

inflation, high interest rates, a consumption slowdown, earnings moderation,

valuation concerns in mid/small caps, and volatile FII flows, leading to

heightened market volatilities. Nevertheless, the Nifty-50 ended CY24 with a 9%

gain and India's market capitalization reached USD5.2t, representing 4.2% of the

global market cap.

The year experienced a series of events influencing global and Indian equity

markets, including the Fed's rate cut cycle, strong US markets, China's stimulus

packages, Japan's yen carry trade, Mr. Trump's presidential win, and geopolitical

tensions, leading to volatility in FII flows into India. As a result, Indian markets

corrected from their Sep'24 highs.

However, despite FII selloffs causing market jitters, strong domestic liquidity has

dominated flows into the Indian equity market, reducing volatility. The increase

in demat accounts (at ~180.5m) and SIP flows (of over INR250b per month)

continues to strengthen domestic liquidity against the sharp FII outflows and

global volatility during the year.

DIIs invested a record ~USD63b during the year, achieving 17 subsequent

months of inflows and exceeding the combined DII inflows of CY22 and CY23. In

contrast, FII inflows in CY24 remained flat.

Moderation in macro indicators..:

Following a strong FY24, 1HFY25 experienced

a slowdown in key macroeconomic indicators. Real GDP growth fell to 5.4% YoY

in 2QFY25, down from 8.2% YoY in FY24, due to lower government spending and

reduced consumption.

Total capital spending of the Central Government

(excl.

Loans and Advances) is budgeted at INR9.2t for FY25, down 13.5% YoY in

1HFY25, achieving only 39.1% of BE in 1HFY25 (vs. 50% each in the last two

years). Given the past run rate, we estimate the Center’s actual capex could

reach 92-95% of BE (INR8.5-8.7t) this year. We project FY25 GDP growth at

approximately 5.8% YoY, lower than the earlier estimate of 6.1%. In addition,

high-frequency data (e.g., GST collections, auto monthly numbers, power

demand, PMI data, et al.) also showed a slight moderation from previous highs.



Nifty-50: Nine successive years of

positive returns

YoY returns (%)

29

24

20

12

3

3

15

9

Domestic liquidity showcases its prowess





4



FII-DII yearly flows (USD b)

FII flows

DII flows

32.2

62.9

Macro and micro momentum ebbs; resurgence likely in 2HFY25



21.4

22.3

-0.1

-17.0

FII flows as of 30

th

Dec’24 and DII flows as of 31

st

Dec’24

Gautam Duggad – Research Analyst

(Gautam.Duggad@MotilalOswal.com)

Research Analyst: Deven Mistry

(Deven@MotilalOswal.com) |

Aanshul Agarawal

(Aanshul.Agarawal@Motilaloswal.com)

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Investors are advised to refer through important disclosures made at the last page of the Research Report.

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Nifty Midcap 100: Five

consecutive years of positive

returns

Nifty Midcap 100

YoY return (%)

47

47

46

22

7

-4

-15

4

24





…along with earnings momentum…:

Following a healthy MOFSL Universe/Nifty-

50 CAGR of 26%/21% over FY20-24, corporate earnings also moderated in

1HFY25. The earnings performances for MOFSL Universe (-1% YoY) and Nifty-50

(+4% YoY) in 2QFY25 were the lowest in 8 and 17 quarters, respectively.

However, excluding global commodities, the performances remained strong at

+12% and +11% YoY, respectively.

…but, recovery in sight…:

Notably, we expect earnings to recover in 2HFY25

(~9% YoY growth for the MOFSL Universe in 2H vs. flat performance in 1H).

The NDA’s victories in the Center and key states ensure policy continuity:

The

BJP-led NDA secured a full majority in the 2024 Lok Sabha elections for a third

consecutive term, marking a significant pro-incumbency trend amid global anti-

incumbency challenges. The government's retention of key cabinet positions

and victories in state elections, including Maharashtra, Haryana, and Uttar

Pradesh by-elections, enhance market confidence in policy continuity and

administrative stability.

Mid-and small-caps remain the winners for the second consecutive year:

The

business momentum in sectors such as Real Estate, Capital Goods, Automobiles,

Infrastructure, Industrials, Utilities, Hotels, and PSUs (mainly falling under the

mid- and small-cap categories) is driving stock prices as well. Conversely, sharp

FII outflows from large-cap stocks (Nifty-50) have led to their underperformance

this year again. Despite ~30% correction in a few stock prices from their Sep’24

highs, the mid- and small-cap indices handsomely outperformed the large-cap

index. Both Nifty Midcap 100 and Nifty Smallcap 100 grew 24% YoY each,

outperforming Nifty-50 by 15% each in CY24.

Strong retail participation induces launches of multiple mid-, small-cap and

thematic funds:

The strong retail participation and outperformance of mid- and

small-cap stocks since CY23 have led to new mutual fund launches and higher

investments. Favorable conditions in these sectors have also led to numerous

thematic fund launches, boosting mid- and small-cap performance in CY24.

After holding rates at a two-decade high, the US Fed began easing rates in CY24,

its first reduction in four years. The Fed lowered rates by 100bp in its last three

meetings, setting the target range at 4.25-4.50%.

Several global central banks are also easing rates from multi-year highs due to

waning inflation and weak economic growth. The RBI, however, continued to

hold rates due to higher-than-expected inflation, and it is likely to start easing

by Feb’25, in our opinion. Continued global rate easing may attract sustained

capital flows to emerging markets, including India.

As we conclude 2024, we explore the key factors driving growth and market

influence going forward.

Despite global challenges, India continues to be the fastest-growing economy

among major nations, reflecting its resilience. Factors such as sustained growth,

political stability, prudent reforms, infrastructure investment, healthy corporate

finances, ample foreign reserves, controlled twin deficits, stable crude prices,

2

Political continuity in a volatile world



Nifty Smallcap 100: Two

consecutive years of positive

returns

Nifty Smallcap 100

YoY return (%)

59

57

56

21

2

-10

-29

24

Broader markets back in the spotlight!



-14



Reducing interest rates to bring relief to global markets

Indices performance (%)

Nifty50

Nifty Midcap 100

Nifty Smallcap 100

24 24

14

9









27 26

Back to the Future – CY25!

YoY

5yr CAGR

January 2025

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

FII flows remained

flat in CY24 (vs. an

inflow of USD21.2b

in CY23)





DIIs posted the

highest inflow of

USD63b in CY24,

~15% higher than

the combined

inflows of CY22

and CY23





India’s

contribution to

the world market

cap stood at 4.2%

in CY24, up 40bp

YoY



and lower commodity inflation protect India from external shocks and position it

for future growth.

The past year experienced a slowdown in earnings and consumption, rising

global interest rates, geopolitical uncertainties, and high valuations in some mid-

and small-cap sectors. CY25 may alleviate some concerns, with a gradual

recovery in corporate earnings and consumption expected due to increased

government spending in early CY25 and improved rural incomes after a

successful kharif season. However, there may be some volatility in global trade

and currencies after the new US administration takes charge, and persistent

inflation could slow anticipated interest rate cuts.

Valuations and view:

After a relentless rise, valuations have moderated from

the CY24 highs. The 12-month forward P/E of Nifty-50 trades at 19.9x in Dec’24

(vs. 22.5x in Sep’24) at a discount to its LPA of 20.5x. Notably, Nifty-50’s EPS

CAGR of 17% over FY20-25E (at INR1,061 in FY25E) has been higher with the

index CAGR of 14% during the last five years (ending Dec’24). Further, Nifty-50’s

earnings are anticipated to clock an 11% CAGR between FY24 and FY26.

Despite recent corrections, mid-cap and small-cap indices trade at premiums of

56% and 17% over the Nifty-50, at ~31x and 23x, respectively. Thus, large caps

remain attractive amid historically high valuations for broader markets.

Against this backdrop, we would maintain cautious optimism for potential

upside, though lower than the past two years. We remain optimistic on IT,

Healthcare, BFSI, Consumer Discretionary, Industrials, and Real Estate sectors

with a distinct bias towards large-caps.

Top Ideas:

Among

large-caps,

we favor HDFC Bank, Bharti Airtel, SBI, L&T, HCL

Tech, M&M, Zomato, Titan Company, Mankind Pharma, and Dixon Tech.

Among

mid- and small-caps,

we are bullish on Indian Hotels, Cummins India,

Kaynes, BSE, Godrej Properties, Coforge, Metro Brands, IPCA, Angel One, and

JSW Infra.

Exhibit 1: Nine consecutive years of positive returns for the first time in history!

Nifty-50 YoY change (%)

69

36 37

13

-1

-23

-18

20

3

-15 -16

-52

11

67

Six consecutive

years of positive

72

returns

55

36 40

18

28

7

-4

-25

31

3

29

3

12 15

24

4

20

76

Nine consecutive years of

positive returns

9

Source: Exhibit data is sourced from Bloomberg, NDSL, SEBI, Capitaline, and MOFSL database

January 2025

3

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 2:

The journey of the past nine years

2016

Flat returns due to

demonetization

2018

IL&FS crisis blows

up with NBFC crisis

and elevated

volatility across

the board

2020

The year hit by

pandemic-induced

volatility and

unpredictability

2022

India stands out in

the global arena –

outperforms

significantly

2024

Continued

resilience in an

eventful year amid

geopolitical

tensions, elections,

consumption, and

earnings slowdown

GST

implementation;

markets scale new

highs with strong

domestic equity

inflows

GDP growth

decelerates notably;

Nifty-50 rallies within

a narrow band

(reclaiming the 12K

level)

A year of recovery

and heightened

activities on

multiple fronts

Strong resilience

amid geopolitical

headwinds and

multi-year high

global interest

rates

2017

2019

2021

2023

Exhibit 3: A precap to an eventful CY24 with a resilient up move

Nifty50 index and key events of CY24

Sharp FII outflows ahead of the US election

results, China announcing economic

stimulus package, and moderation in

domestic earnings and consumuption

slowdown

MH and Jharkhand

election results. NDA's

big victory in MH fuels

optimism in the

markets

Sharp FII selling (of

USD3.1b) in Jan'24,

26,000

rising bond yields

in the US amid

geopolitical

tensions in the

25,000

Middle East, weak

economic data

from China, and

valuation concern

24,000

in Indian markets

Markets remain

volatile ahead of the

LS electon and

results. Further, talks

on SEBI announcing

measures to curb

F&O trading in the

etail segment

Market bounces

back as clarity

emerges

regarding NDA

forming the govt

Japan Yen

carry trade

unwind

23,000

The US Fed cuts

rate by 50bp in

Sep'24

Trump wins

US

Presidential

Election

Oct-24

Nov-24

22,000

Lower-than-expected seats for

BJP in LS election, Modi re-

elected as the PM for third term

Feb-24

Mar-24

Apr-24

May-24

Jun-24

Jul-24

Aug-24

Sep-24

Macro and Micro

moderation and

weak INR; US

Fed rate cut of

25bp and FII flow

volatility

Dec-24

21,000

Jan-24

January 2025

4

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 4:

India underperformed key global markets, while it

outperformed EMs in CY24 (in USD terms)…

30

24

20

17

CY24 YoY growth (%)

(in USD)

Exhibit 5:

…it also underperformed key developed markets

in local currency terms during the year

CY24 YoY (%)

30

28

24

20

19

19

9

6

5

-2

(in local currency)

12

9

6

5

4

-8

-21

-30 -32

-8 -10 -10

Exhibit 6:

India remains the fourth-best performer over the

last 10 years in USD terms…

10-yr CAGR (%)

(in USD)

Exhibit 7:

…while it is the third-best performer in local

currency terms in the previous decade

10-yr CAGR (%)

15

11

11

(in local currency)

15

11

9

8

6

6

4

9

9

1

9

0

0

-1

-1

-2

7

6

6

2

2

1

1

Exhibit 8:

India’s share in world market cap down from a Sep’24 high of 4.6% to 4.2% in Dec’24

5.1

4.2

3.3

2.4

1.5

India's Contribution to World Mcap (%)

3.3

Average: 2.7%

4.2

1.6

January 2025

5

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 9:

Global ranking based on Mcap: India’s global ranking improved five places in the last decade

Mkt Cap Rank

Country

United States

China

Japan

Hong Kong

India

Canada

United Kingdom

France

Taiwan

Germany

Switzerland

Australia

South Korea

United Arab Emirates

Sweden

Netherlands

Spain

Indonesia

Denmark

Italy

CY04 CY09 CY14 CY19 CY23 CY24

1

16

2

6

17

7

3

4

12

5

9

11

13

36

15

14

10

37

26

8

1

5

2

3

10

7

4

6

16

8

12

11

13

37

18

22

14

28

30

17

1

2

3

4

10

6

5

7

13

8

9

11

12

32

16

24

15

22

27

18

1

2

3

4

9

7

5

6

13

8

10

12

11

31

15

17

18

21

23

19

1

2

3

4

5

8

7

6

11

9

10

13

12

16

14

15

20

19

18

21

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Mcap

(USD T)

62.6

10.2

6.4

5.6

5.2

3.1

3.1

3.0

2.5

2.4

2.0

1.6

1.5

1.0

1.0

1.0

0.8

0.8

0.8

0.7

CY24

Chg (%)

24

7

3

18

24

7

0

-10

21

0

-5

-3

-20

6

-4

-2

6

0

-11

5

CAGR (%)

5 Year

13

7

0

0

19

6

-3

2

13

1

1

3

1

33

3

6

2

8

9

1

10 Year

10

8

4

3

13

4

-2

4

10

3

2

3

3

17

4

9

1

6

8

3

Change

in Rank

0

0

0

0

5

0

-2

-1

4

-2

-2

-1

-1

18

1

8

-2

4

8

-2

Exhibit 10:

Trends in Nifty indices’ performances (%) — Sharp reversions to the mean clearly visible in their annual

performance

Nifty-50

Year

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23

Dec-24

Closing

6,304

8,283

7,946

8,186

10,531

10,863

12,168

13,982

17,354

18,105

21,731

23,645

1yr

7

31

-4

3

29

3

12

15

24

4

20

9

CAGR (%)

3yrs

1

21

10

9

8

11

14

10

17

14

16

11

5yrs 10yrs

16

10

5

12

12

11

8

12

16

11

15

14

13

15

11

8

6

14

9

9

14

12

13

11

Nifty

Midcap

100

Closing

8,071

12,584

13,397

14,351

21,134

17,876

17,103

20,843

30,443

31,509

46,182

57,199

CAGR (%)

1yr

-5

56

6

7

47

-15

-4

22

46

4

47

24

3yrs

-3

27

16

21

19

10

6

0

19

23

30

23

5yrs 10yrs

17

11

9

19

20

17

6

9

16

8

21

27

13

15

13

11

9

17

9

9

17

14

19

16

Nifty

Smallcap

100

Closing

3,403

5,273

5,653

5,781

9,093

6,449

5,835

7,088

11,289

9,731

15,144

18,769

CAGR (%)

1yr

-8

55

7

2

57

-29

-10

21

59

-14

56

24

3yrs

-6

25

15

19

20

4

0

-8

21

19

29

18

5yrs

15

9

7

16

20

14

2

5

14

1

19

26

10yrs

-

15

10

6

5

14

5

6

15

10

16

14

January 2025

6

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 11:

CY24 performance of sectoral indices (%)

YoY change (%)

Exhibit 12:

No. of years of positive returns over the last

nine-year period

9

7

6

9

7

(No. of years of positive return)

9

24 24

39 34

23 22 22

7

7

7

7

14

6

6

6

4

3

8

5

5

0

0

-24

Exhibit 13:

Trends in sectoral performance (%) — Oil & Gas and Financials only sectors to deliver eight consecutive years of

positive returns

Return YoY (%)

Sector

Nifty-50

Midcap

Smallcap

Capital Goods

Real Estate

Utilities

Metal

Healthcare

Auto

Technology

Infra

Bank PSU

Telecom

Oil & Gas

Consumer

Finance

Bank PVT

Media

Nifty

Nifty Midcap 100

Nifty Smallcap 100

S&P BSE Capital Goods

Nifty Realty

S&P BSE Power

Nifty Metal

Nifty Pharma

Nifty Auto

Nifty IT

Nifty Infra

Nifty PSU Bank

S&P BSE Telecom

Nifty Energy

Nifty FMCG

Nifty Fin. Services

Nifty Pvt. Bank

Nifty Media

Index

CY17

29

47

57

40

110

20

49

-6

31

12

34

24

49

39

29

41

41

33

CY18

3

-15

-29

-2

-33

-16

-20

-8

-23

24

-13

-17

-41

1

14

11

8

-26

CY19

12

-4

-10

-10

28

-4

-11

-9

-11

8

3

-18

13

11

-1

26

16

-30

CY20

15

22

21

11

5

7

16

61

11

55

12

-31

14

6

13

4

-3

-9

CY21

24

46

59

53

54

69

70

10

19

60

36

44

43

34

10

14

5

35

CY22

4

4

-14

16

-11

26

22

-11

15

-26

6

71

-4

14

18

10

21

-10

CY23

20

47

56

67

81

33

19

34

48

24

39

32

31

29

29

13

14

20

CY24

9

24

24

22

34

20

8

39

23

22

16

14

26

5

0

9

0

-24

5-yr

CAGR (%)

14

27

26

32

29

29

25

24

23

23

21

21

21

17

14

10

7

0

Note: NSE Indices are used for the above sector performance, except Utilities, Capital Goods, and Telecom which are from BSE. NSE Metal

index includes Adani Enterprises.

January 2025

7

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 14:

Over the last nine years, mid-caps have delivered seven and small-caps have reported six years of positive returns

Nifty50

56

55

31

6

-4

7

3

7

2

29

3

12

15

47

57

24

4

4

Nifty Midcap 100

Nifty Smallcap 100

59

46

22

21

20

47

56

24

24

9

-15

CY15

CY16

CY17

-29

CY18

-4

-10

CY20

CY21

-14

CY22

CY23

CY24

CY14

CY19

CY24 in retrospect















Most global economies end higher in CY24:

Key global markets indices such as

Nasdaq (+30%), US S&P500 (24%), Taiwan (+20%), China (+17%), Germany

(+12%), Japan (+7%),

India (+6%),

MSCI EM (+5%) and the UK (+4%) gained,

while France (-8%), South Korea (-21%), Brazil (-30%) and Russia (-32%)

declined in CY24 in USD terms. Though MSCI India (+17%) outperformed MSCI

EM (+5%), its performance remained in-line with MSCI World (+17%) in CY24.

India remained among the average performers in local currency terms, while

among top performers in USD terms over the last 10 years. The Nifty-50 posted

a CAGR of 9%/11%/14%/11%/ 11%/13% (in local currency) and a CAGR of

6%/6%/10%/8%/6%/9% (in USD) in the 1-yr/3-yr/5-yr/10-yr/15-yr/20-yr periods.

The top gainers in the sectoral space:

Healthcare (+39%), Real Estate (+34%),

Auto (+23%), Technology (+22%), Capital Goods (+22%), Utilities (+20%) Infra

(+16%), PSU Bank (+14%), Metals (+8%), Energy (+5%) gained, while FMCG and

Pvt. Banks remained flat YoY; Media reported a 24% YoY decline.

Nifty-50 performance scorecard:

The breadth was positive in CY24, with 32 of

the Nifty-50 stocks closing higher. Trent (+133%), M&M (+74%), BHEL (+59%),

Bharti Airtel (+54%), and Sun Pharma (+50%) were the top performers.

Conversely, IndusInd Bank (-38%), Asian Paints (-33%), Nestle (-18), Tata

Consumer (-15%) and HUL (-13%) were among the key laggards.

Nifty Midcap 100 performance scorecard:

Oracle Fin. Serv (+204%), Dixon Tech

(+173%), PB Fintech (+165%), BSE (+140%), and RVNL (+133%) were among the

top gainers, while Poonawalla Fin (-28%), IDFC First (-29%), AU Small Fin (-29%),

Bandhan Bank (-34%), Vodafone Idea (-50%) were the key laggards.

Nifty Smallcap 100 performance scorecard:

Kaynes Tech (+184%), Amber Ent.

(+136%), Aegis Logistics (+133%), Blue Star (+126%), IFCI (+114%) were among

the top gainers, whereas Aarti Industries (-37%), Tanla Platforms (-39%), RBL

Bank (-43%), CRADEG (-44%), Zee Ent. (-56%) were the key laggards.

Nifty-500 performance scorecard:

GE Vernova (+311%), KFin Tech (+218%),

Jyoti CNC (+216%), MOFSL (+207%), Oracle Fin. Serv (+204%) were among the

top gainers, whereas Honasa Consumer (-42%), RBL Bank (-43%), CREDAG (-

44%), Vodafone Idea (-50%), and Zee Ent. (-56%) were the top losers.

January 2025

8

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!



A strong year for

fundraising with

India Inc. raising

INR1.9t in CY24 (vs.

INR1.3t in CY23)

Domestic fundraising buoyant:

CY24 has been a blockbuster year for the Indian

primary market, with INR1.9t raised through more than 333 IPOs to date that

surpasses the previous record of INR1.3t in CY21 and far exceeds last year's total of

INR576b. The contribution of new listings through IPOs to the Indian market

capitalization witnessed an uptick of 3.3% vs. 1.4% in CY23. QIPs also surged

during the year, with capital raised through 99 QIPs reaching a record high of

INR1,348b (2.6x of CY23). Offers for Sale (OFS), which indicate a dilution of

promoters’ holdings, have jumped to INR305b in CY24 from INR189b last year.

This surge in stake sale was mainly led by a private firms contributing above 70%

of the overall amount.

Exhibit 15:

64% of the stocks delivered positive returns in CY24, lower than that of CY23

88

56

60

Positive breadth %

84

70

68

98

64

52

CY16

CY17

CY18

CY19

CY20

CY21

CY22

CY23

CY24

Exhibit 16:

32 of the Nifty-50 constituents delivered positive returns in CY24 (vs. 48 in CY23)

CY24 return %

Exhibit 17:

21 of the Nifty-50 companies have delivered positive returns in seven out of nine years

21

16

2

9

3

3

5

8 7 6 5 4

Number of years of

positive returns

January 2025

9

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 18:

Only two stocks within Nifty-50 have generated positive returns in all the nine years

HDFC Bank Ltd

Trent Ltd

126

133

55

15

68

46

13

7

20

30

13

CY20

55

27

3

CY21

11

10

CY22

5

CY23

4

CY24

CY16

CY17

CY18

CY19

Exhibit 19:

Relative performance (%) – Trent outperformed the Nifty-50 for nine years, while BHEL and Grasim outperformed

for seven years and JSW Steel outperformed for six years

Trent

Bharat Electron

Grasim Inds

JSW Steel

106

55

11

-3

-55

CY16

CY17

-32

12

40

51 51 45

64

23

38

2

13

4

-5

124

17

36 37

4

11

33

2

-22 -24

16

5 10

28 31

50

5

-7

CY18

CY19

CY20

CY21

CY22

CY23

CY24

Exhibit 20:

Relative performance (%) – Coal India, HDFC Life, SBI Life and TATA motors underperformed seven times in the

last nine years

Coal India

HDFC Life Insur.

SBI Life Insuran

Tata Motors

138

81

50 49

8

-3

-3

-17

-63

CY16

CY17

CY18

CY19

CY20

CY21

CY22

CY23

CY24

-29

-5

-7

-21-16

-28

-17

-1

-24

-6 -4

-14-12-15

January 2025

10

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 21:

Leaders and Laggards of Nifty Midcap 100 in CY24

204

YoY Change (%)

173 165

140 133 127

116 109

100

95

-13

-13

-18

-22

-24

-28

-29

-29

-34

-50

Exhibit 22:

Leaders and Laggards of Nifty Smallcap 100 in CY24

184

136

133

126

114

105

103

103

95

YoY Change (%)

93

-20

-21

-21

-22

-29

-37

-39

-43

-44

-56

Exhibit 23:

Leaders and Laggards of NSE500 in CY24

YoY change (%)

January 2025

11

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 24:

NSE500 sectoral market caps: Consumer Durables, Telecom, Real Estate led the market cap gains while Media and

Consumer reported a decline

42

36

Sectoral Market cap

3234 3231

2829

28

24 2227

26 25

18 18 1819

CY23

1315 1215

CY24

9

13 1112 11

10 8 9

7 8 5 8

4 5 3 5

2 2 1 2 1 1

Exhibit 25:

Large-cap contribution to market cap dipped to an all-time low, while mid- and-small-cap contribution rose to an

all-time high

Market cap contribution (%)

100

90

80

70

60

7.2

(low)

9.5 (low)

8.6

10.8

251 onwards (SMALL)

21.0 (high)

101 to 250 companies (MID)

80.6

83.0 (high)

Top 100 companies (LARGE)

19.3 (high)

59.7 (low)

Note: Dec’24 market cap contribution for Large/Mid/Small stood at 59.7%/19.3%/21.0% respectively

Exhibit 26:

Net FII inflows remained volatile in CY24

FII (USD b)

6.7

5.0 4.1

1.9

1.8

1.7

7.0

2.3

4.0

0.5

3.3

3.1

1.4

5.9

1.9

Exhibit 27:

DII flows continued to remain strong

DII (USD b)

12.8

6.8 6.7

5.8

5.3

5.3

4.0

3.8

3.4

3.2

3.1

3.0 3.4

2.8

2.4 1.7

1.6

-0.2 -0.6

-3.7

-2.3

-2.7

-3.1

-1.1

-3.0

-2.2

4.1 3.7

2.9

2.3

0.3 0.5

-10.9

-0.4 -0.3

Note: FII flows in CY24 is as of 30 Dec’24

th

January 2025

12

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 28:

Net FII flows turned positive in CY23

FII (USD b)

14.2

7.7

3.8

-0.1

-17.0

23.4

Exhibit 29:

DII flows continued to remain strong

DII (USD b)

62.9

21.4

14.0

15.9

12.1

32.2

6.0

-5.0

22.3

-4.6

Note: FII flows in CY24 is as of 30 Dec’24

th

Exhibit 30:

Trends in trailing 12-month cumulative FII and DII flows

T12 month cummulative FII flows (USDb)

65

40

15

-10

-35

-0.1

T12 month cummulative DII flows (USDb)

62.9

Exhibit 31:

Equity contribution to total inflows further moderated in CY24*

Total Net Inflows (INR t)

Equity % to total inflows

334

75

51

62

19

83

38

4

1.8

CY20

56

75

44

0.7

CY14

1.8

CY15

2.9

CY16

2.4

CY17

1.5

CY18

2.0

CY19

1.9

CY21

0.7

CY22

2.7

CY23

9.1

CY24YTD

Note: Total inflow is as of Nov’24

January 2025

13

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 32:

Domestic MFs’ AUM continued to scale new highs

Equity Incl. ELSS & Index AUM (INR t)

CY18-CY23 CAGR:

AUM 25%

Nifty 15%

Nifty Index

21,731

17,354

13,982

9.5

13.9

16.6

24,131

33.1

18,105

23.8

10,863

7.9

12,168

8.1

CY18

CY19

CY20

CY21

CY22

CY23

CY24YTD

Note: CY24 AUM is as of Nov’24

A blockbuster year for fundraising

Exhibit 33:

Fund mobilization in public markets remained strong in CY24 (INR b)

Year

CY14

CY15

CY16

CY17

CY18

CY19

CY20

CY21

CY22

CY23

CY24

th

IPOs

15

139

270

760

335

178

313

1,314

613

576

1,717

FPOs

5

0

0

0

0

0

150

0

43

0

182

IPOs + FPOs

20

139

271

760

335

178

463

1,314

656

576

1,899

OFS

47

355

125

193

132

264

215

240

112

189

305

QIPs

321

189

48

587

165

352

805

420

117

523

1,348

Total Equity

388

683

443

1,540

632

794

1,483

1,974

886

1,289

3,551

Note: Data as of 30 Dec, 2024

Exhibit 34:

Domestic fundraising turned buoyant, up 175% YoY

Total Equity fund raise (INR b)

3,551

1,974

1,540

388

CY14

1,483

632

794

886

1,289

683

443

CY16

CY17

CY15

CY18

CY19

CY20

CY21

CY22

CY23

CY24YTD

January 2025

14

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 35:

Equity fundraising through IPO and FPO offerings tripled YoY (INR b)

IPOs

FPOs

No of companies

242

169

49

63

94

760

5

15

CY14

139

CY15

270

CY16

CY17

335

CY18

178

CY19

166

68

47

150

313

CY20

CY21

CY22

CY23

CY24YTD

121

1,314

151

336

182

1,717

43

613

576

Exhibit 36:

Trend in contribution to total fundraising (%) – QIPs’ share remained strong at ~50% for the last two years

IPOs + FPOs

28

83

52

61

12

5

CY14

20

CY15

CY16

CY17

CY18

11

28

38

13

26

21

33

49

53

22

CY19

31

CY20

CY21

CY22

OFS

QIPs

21

44

54

12

13

13

41

15

14

67

74

45

38

9

53

CY23

CY24YTD

Exhibit 37:

Contribution of new listings (through IPOs) to Indian market cap rose to 3.3% in CY24 from 1.4% in CY23

India Mkt Cap (INR t)

3.7

Contribution through new listing (%)

3.4

2.8

1.4

3.3

1.2

0.2

1.7

1.6

0.8

1.3

98

CY14

100

CY15

106

CY16

152

CY17

145

CY18

156

CY19

189

CY20

267

CY21

283

CY22

366

CY23

445

CY24

YTD

January 2025

15

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

MOFSL and Nifty50 earnings trend

Exhibit 38:

Nifty-50 earnings moderated in FY25E and is expected to pick up in FY26 (INR t)

Nifty PAT (INR t)

YoY Growth (%)

20

13

7

2

3

5

-2

15

12

6

37

26

17

2.5

FY14

2.6

FY15

2.8

FY16

2.9

FY17

3.0

FY18

3.5

FY19

3.4

FY20

4.1

FY21

5.6

FY22

6.3

FY23

7.9

FY24

8.4

FY25E

9.8

FY26E

Exhibit 39:

MOFSL earnings also moderated from FY24 highs and is expected to pick up in FY26 (INR t)

MOFSL PAT (INR t)

YoY Growth (%)

29

37

30

20

15

9

3

2

1

-5

10

11

5

3.7

FY14

3.8

FY15

3.9

FY16

4.5

FY17

4.5

FY18

5.0

FY19

4.7

FY20

6.1

FY21

8.3

FY22

9.3

FY23

12.1

FY24

12.6

FY25E

15.2

FY26E

Large-cap valuations below LPA







The Nifty-50 has mostly traded below its long period average (LPA) since the

beginning of CY24. Relentless FII selling led to significant pressure on large-cap,

relative to mid- and small-cap companies.

While India continues to demonstrate its resilience, other emerging markets

continue to struggle. This, along with the factors mentioned above, continues to

foster optimism about the Indian markets. Strong domestic tailwinds, combined

with ongoing record-high retail participation, mitigate the potential downside

risks from external shocks and reinforce the potential for further upside.

Nifty’s 12-month forward P/E is trading at 19.9x, below its LPA of 20.5x. Its 12-

month forward P/B stands at 3.2x, representing a 12% premium to the average

of 2.8x. Further, upside from here on will be a function of earnings delivery vs.

expectations in the near term and moderation of global volatility.

January 2025

16

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 40:

Trailing Nifty P/E (x)

29

25

21

17

13

10 Year Avg: 22.7x

22.6

Exhibit 41:

Trailing Nifty P/B (x)

4.4

3.8

3.2

2.6

2.0

10 Year Avg: 3.1x

3.6

Exhibit 42:

12M forward trailing Nifty P/E (x)

28

24

20

16

12

10 Year Avg: 20.5x

19.9

Exhibit 43:

12M forward Nifty P/B (x)

3.9

3.4

2.9

2.4

1.9

10 Year Avg: 2.8x

3.2

Mid- and small-caps trade at a significant premium to large-caps













Both mid-cap and small-cap stocks continue to trade at a premium and notably

outperformed large-caps since the beginning of CY23. A healthy, broad-based

earnings momentum, along with strong retail participation, propelled mid-caps

and small- caps to all-time highs.

The ongoing outperformance of laggards from the past decade (such as Real

Estate, Capital Goods, PSUs, Industrials, Defense, etc.), despite not being a

major contributor to the large-cap indices, led the rally in the broader markets.

Strong economic momentum, increased government capex and infra spending,

healthy order books, and improved earnings outlook have allowed these sectors

to recover and show robust growth potential.

The top gainers in the sectoral space were: Healthcare (+39%), Real Estate

(+34%), Auto (+23%), Technology (+22%), Capital Goods (+22%), Utilities (+20%)

Infra (+16%), PSU Bank (+14%), Metals (+8%), Energy (+5%), FMCG (+0%), Pvt.

Bank (+0%), Media (-24%).

After moderating from the Sep’24 highs, the 12-month forward P/E for mid-caps

is trading at ~31x, at a 56% premium to the Nifty-50. Conversely, the 12-month

forward P/E for small-caps is trading at 23.2x, at a 17% premium to the Nifty-50.

Given the growth outlook in these sectors, we believe broader market optimism

may continue. However, the rich valuations of mid- and small-cap stocks suggest

caution in areas where stock prices have significantly outpaced earnings growth.

January 2025

17

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Exhibit 44:

12-month forward P/E(x)

38

32

26

20

14

8

Nov'14-Nov'24 P/E(x)

Nifty50 avg : 20.5x

Midcap avg : 22.2x

Smallcap avg : 16.0x

Nifty-50(x)

Midcap100 P/E(x)

Smallcap100 PE (x)

Nifty50 trade at a premium

31.1

23.2

19.9

Mid caps trade at a significant premium to large caps; small cap

valuation also outpaced that of large caps in the past one year

Exhibit 45:

Trend in India’s Mcap-to-GDP (%) – at its year-end high

GFC: Peak of 149% in

Dec’07

Average of 85% for the period

Lowest

Nominal GDP growth in

FY24/FY25E: 9.6%/9.2%

132

103 113

96

138

84

105

84

56

97

90

71

64

66

82

69

84

79

80

57

Exhibit 46:

Large caps’ market cap-to-

GDP below CY23 highs

Large caps market cap to GDP

(%)

80

73

68

45

Average 63%

8582

78

74

66

Exhibit 47:

Mid caps’ market cap-to-

GDP at an all-time high

Mid caps market cap to GDP (%)

27

24

Exhibit 48:

Small caps’ market cap-to-

GDP at an all-time high

Small caps market cap to GDP

(%)

29

23

Average 12%

12

5

1110

1614

Average 13%

14

13 13

12 13 13

12

10 9 9 10

9

6

18

17 16

57

60

54 51

55 57

50

49

43

13

12

10 8 11 10

8

5

67

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

January 2025

18

REPORT GALLERY

RECENT STRATEGY/THEMATIC REPORTS

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

January 2025

19

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

RECENT INITIATING COVERAGE REPORTS

January 2025

20

INDIA STRATEGY: On cloud 9 with a tinge of grey!!!!

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take

appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in

the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National

Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for

its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of

Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of

associate entities of Motilal Oswal Financial Services Limited are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or

derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial

instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and

other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are

completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL

may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage

service

transactions.

Details

of

pending

Enquiry

Proceedings

of

Motilal

Oswal

Financial

Services

Limited

are

available

on

the

website

at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental research and Technical

Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can

have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary

to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures

Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg.

No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to

“Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with

professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian

Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the

United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and

under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and

services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act

and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any

investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption

from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission

("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities

International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,

MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research

analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets (Singapore) Pte. Ltd. (“MOCMSPL”) (UEN 201129401Z), which is a holder of a capital markets services license and an exempt

financial adviser in Singapore.This report is distributed solely to persons who (a) qualify as “institutional investors” as defined in section 4A(1)(c) of the Securities and Futures Act of Singapore (“SFA”) or (b)

are considered "accredited investors" as defined in section 2(1) of the Financial Advisers Regulations of Singapore read with section 4A(1)(a) of the SFA. Accordingly, if a recipient is neither an “institutional

investor” nor an “accredited investor”, they must immediately discontinue any use of this Report and inform MOCMSPL .

In respect of any matter arising from or in connection with the research you could contact the following representatives of MOCMSPL. In case of grievances for any of the services rendered by MOCMSPL

write to grievances@motilaloswal.com.

Nainesh Rajani

Email: nainesh.rajani@motilaloswal.com

Contact: (+65) 8328 0276

.

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

********************************************************************************************************************************

The associates of MOFSL may have:

-

financial interest in the subject company

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actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public

appearance.

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received compensation/other benefits from the subject company in the past 12 months

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any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific

recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an

inherent conflict of interest in some of the stocks mentioned in the research report.

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acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

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be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or

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The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

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which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is,

or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

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such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or

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Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to

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of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject

to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its

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