India Strategy

The Eagle Eye - September 2025

Tariff headwinds dampen benefits of GST cuts

Gautam Duggad(Gautam.Duggad@motilaloswal.com)

|

Deven Mistry

(Deven@motilaloswal.com)

Abhishek Saraf

(Abhishek.Saraf@motilaloswal.com) |

Anshul Agarawal

(Aanshul.Agarawal@motilaloswal.com)

1

June 2020

CONTENTS

GLOBAL MARKETS



India underperforms global

equities MoM and YTD



Trade tariffs are starting to reflect in

US inflation



Estimated GDP impact of US tariffs

by country



GST reforms poised to boost the

consumption growth engine

DOMESTIC MARKETS



A review of Indian markets since

Sep’24 highs



Earnings remain muted, though

domestic flows hit record highs



About 70% of the BSE-200

constituents end lower in Aug’25



Earnings growth outpaces the

Index only in midcaps

FLOWS AND VOLUMES



DII monthly inflows hit second-

highest level, FII outflows intensify



Monthly average cash volumes

remain flat, while F&O volumes

rise



Forex reserves remain stable

MoM, INR hits all-time low

KEY RESEARCH REPORTS



Initiating Coverages on:



HDB Financials



KPIT Technologies



TATA Technologies



TATA Elxsi



Earnings review 1QFY26 - Modest

yet Resilient!



India Strategy| Ownership

analysis- DIIs fortify their grip!

MULTI-YEAR HIGHS/LOWS



India-US 10-year yield spread

widens marginally after hovering

near historical lows



Broad-based market decline;

Auto leads, Consumer witnesses

modest gains MoM



Earnings growth outpaces the

Index only in midcaps

VALUATIONS



Large-cap valuations near their

average; small- and mid-caps

remain stretched



Auto and Pvt. Banks trade below

their average valuations



EY/BY ratio remains flat MoM



India’s market cap-to-GDP ratio

remains high

CHART BOOK | September 2025

2

June 2020

A view from the EAGLE’S EYE!

CHART BOOK | September 2025

3

June 2020

KEY EXHIBITS

A review of Indian markets since Sep’24 highs





Indian markets remained under pressure and witnessed significant volatility over the past year. Sharp FII selling and a weak INR contributed to

the Indian market’s underperformance compared to key global markets since its Sep’24 highs.

While the broader market weakened, Banks and Pharma declined the least relative to other sectoral indices.

Indices change since Sep’24 high (%)

India underperforms global equities post Sep’24 highs

30

26

13

12

12

11

8

8

7

4

-12

Broad-based weakness in key sectoral indices since Sep’24 highs, Banks outperform

Sep’24 high to Aug’25 (%)

-7

-1

-7

-10

-8

-4

-6

-8

-8

-9

-11

-15

-17

-23

-24

-25

CHART BOOK | September 2025

4

June 2020

KEY EXHIBITS Earnings remain muted, though domestic flows hit record highs (cont..)



On the earnings front, midcaps strongly outperformed largecaps and smallcaps on a trailing 12-month (TTM) basis. Barring largecaps, valuations

remain elevated for the markets since Sep’24 highs.



DIIs infused a record ~USD83b into Indian equities over the past year, effectively offsetting FII selling of ~USD27b since Sep’24. This resilience has

been supported by robust monthly SIP inflows of ~USD3b, which have consistently bolstered DII participation.

Midcaps lead in earnings growth in the past 12 months

TTM PAT growth (%)

35.4

21%

27.3

5%

7%

21.9

Valuations cool off from highs but remain elevated for midcaps and smallcaps

1-year fwd PE (x)

26-Sep-24

30-Aug-25

25.6

24.9

23.9

21.6

1%

Nifty-50

Midcap-150

Small cap-250

Nifty-500

20.6

Nifty Midcap-150 Nifty Smallcap-250

Nifty-50

Nifty-500

Note: TTM PAT represents the aggregate PAT of the last four quarters compared with the

preceding four quarters

Cumulative SIP flows surge beyond INR2.9t (USD33b)

Monthly SIP flows (INR b)

Record DII inflows partly counter market drawdowns amid volatile year

285

265

253

264

260

267

259

259

273

290+

Net institutional flows between Sep'24 (high) and Aug'25

83.0

253

-27.8

Net FII (USDb)

Net DII (USDb)

CHART BOOK | September 2025

5

June 2020

KEY EXHIBITS

Trade tariffs are starting to reflect in US inflation



US CPI inflation climbed sharply due to post-pandemic recovery, global supply chain shocks, and fiscal stimulus, peaking at 9.1% in Jun’22, far

above any tariff-related impact. Aggressive monetary tightening by the Federal Reserve helped bring inflation down significantly through 2023-

24, restoring price stability closer to the 2-3% range.



With the latest tariff announcements, inflationary pressures are re-emerging, as higher import costs begin feeding into consumer prices. CPI has

edged higher in recent months; while tariffs are not the sole driver, their contribution is becoming more visible and is expected to intensify.



US CPI is now expected at 2.8-3.3% in CY25 (well above the Fed’s earlier target of 2%), as tariffs and sticky inflation slow the pace of disinflation.

US CPI inflation rises as tariffs increasingly contribute to price gains

3.8%

3.2%

2.6%

2.0%

1.4%

3.7%

US CPI YoY (%)

3.5%

3.0%

Tariff announcement and

imposition period

2.9%

3.1%

2.7%

Fed target of 2%

2.4%

2.3%

US hits India with highest tariff among key economies

Reciprocal Tariff Rate (Effective Aug'25)

50% 50%

46% 44%

37% 36% 34%

32% 32%

Cooling dollar and yields: Relief or warning for the US economy?

112

DXY

US 10-year yield

5.1

4.7

4.2

4.3

110

108

104

25% 25% 24% 24%

104

4.4

100

96

98

3.9

3.5

4.8

4.5

Source: U.S. Bureau of Labor Statistics, Bloomberg, MOFSL

CHART BOOK | September 2025

6

June 2020

KEY EXHIBITS

Estimated GDP impact of US tariffs by country

The enforcement of US tariffs would have a significant bearing on the GDP of key economies.



Vietnam and Mexico face the sharpest GDP hit of up to 3% and 2%, respectively, given their high export dependence on the US.



China, India, Japan, Brazil, and South Korea see smaller GDP drags of 0.2% to 0.8% as diversified domestic demand cushions trade shocks.



Sectoral pain sharper than GDP-level impact: Even when GDP losses look modest, industries like garments (Bangladesh, India), electronics (Taiwan,

Malaysia, Korea), and autos (Japan, Thailand) face significant risks.

Country

Brazil

India

Vietnam

Myanmar

Bangladesh

Thailand

China

Taiwan

Indonesia

Mexico

South Korea

Malaysia

Japan

Estimated GDP Impact

(level-loss vs. baseline)

-0.1% to -0.6%

-0.1% to -0.5%

-0.5% to -3.0%

-0.1% to -0.6%

-0.1% to -0.7%

-0.2% to -1.0%

-0.3% to -1.5%

-0.2% to -0.9%

-0.1% to -0.8%

-0.5% to -2.0%

-0.2% to -0.9%

-0.3% to -1.2%

-0.2% to -0.8%

Rationale/Exposure



Limited US export share; commodities/manufacturing exposure

moderate



US trade share low vs. GDP; sectors like gems, textile, sea foods

exposed























Source(s)

IMF/ADB tariff scenarios; World Bank

trade data

Finance Ministry est. -0.19% GDP, IMF,

ADB

Reuters (UN Comtrade data), IMF,

Very high exposure (~30% of exports go to US); most vulnerable

World Bank

Low direct US trade; indirect supply-chain exposure

ADB/IMF scenario logic

Garments highly exposed to US; GDP impact limited by export

ADB, World Bank trade reports

IMF Asia REO, local media (Bangkok

Electronics, autos, food exports exposed; medium vulnerability

Post/Reuters)

Direct target of US tariffs; past rounds shaved several tenths off GDP IMF, PIIE, World Bank

Export-oriented; electronics in US-China supply chains

IMF Asia REO, Nikkei/Reuters

Exports moderate; commodities matter more

ADB, World Bank

Highly exposed to US demand; severe hit if tariffs are broad

PIIE modelling, IMF, World Bank

Export-reliant, especially tech; US/China demand shocks matter

IMF, World Bank, local press

US share of exports rising; electronics exposed

ISEAS policy briefs, IMF

Autos/capital goods at risk; large economy dampens impact

IMF, World Bank, Nikkei

CHART BOOK | September 2025

7

June 2020

KEY EXHIBITS GST reforms poised to boost consumption growth engine



The Finance Ministry has proposed a significant overhaul of the GST structure, rationalizing it into two primary slabs — 5% for essentials and 18%

for most goods — while retaining a peak rate of 40% for luxury and sin items. These GST reforms are intended to cushion Indian industries and

consumers, revive domestic consumption, and provide relief to sectors facing steep US tariff headwinds such as automobiles, garments, and

electronics.



Key segments likely to benefit include: Consumer Staples (boosted by stronger demand and lower input costs), Automobiles (especially four-

wheelers), Cement, Hotels (sub-INR7,500 room inventory), Retail (footwear), Consumer Durables (notably RACs), Logistics, Quick Commerce, and

Electronics Manufacturing Services (EMS, with improved demand prospects particularly for ACs).

Proposed GST slab changes for key goods

Sector/Goods

Automobiles & Consumer Durables

Clothing & Apparel

Essential Goods (Food & Basic Needs)

Hotels & Restaurants

Insurance, Financial & IT Services

Mobiles & Electronics

Packaged Foods & Beverages

Personal Care & FMCG

Precious Metals (Gold, Silver, Diamonds)

Raw/Semi-Precious Stones

Tobacco, Pan Masala, Alcohol

Current GST Slab (2025)



28% + cess (Luxury/Sin slab)



5% (≤ INR1k), 12% (>INR1k)



0% to 5%



5%-18%



18%



12%-18%











12%

18%

3%

0.25%

28% + cess (effectively 38-60%)

Proposed GST Slab



5%-18% for EV, Tractors, Small cars, 3W, CV 40% SUVs, Sedans

(proposed higher slab)



5% (proposed)



5%



5% or 18%



18%



18%











5%

18%

TBD (likely retained)

TBD

40% (Luxury/Sin slab)

Source: MOFSL, Reuters, ET, Business Standard articles on proposed GST reform

CHART BOOK | September 2025

8

June 2020

KEY EXHIBITS

Earnings growth outpaces the Index only in midcaps



Over the last two years, only midcaps saw their earnings growth outpace the Index performance.



Among key sectors, only Real Estate, Capital goods, Pharma, and Private Banks saw aggregate PAT growth surpass their respective indices over

the last two years.

Auto, Real Estate, PSBs outperform among the key sectoral indices

26

18

15

25

Aug'23 to Aug'25 CAGR (%)

23

22

20

19

13

20

17

14

7

6

5

-16

Two-year CAGR of trailing four-quarter aggregate earnings of Nifty-500 sectors (%)

2-year CAGR of trailing 4-quarter aggregate earnings

34

23

11

23

13

20

21

27

24

16

-2

14

7

6

16

18

Note: Earnings CAGR is derived from the aggregate sectoral earnings of the Nifty-500, comparing the trailing four quarters with the corresponding four quarters two years ago.

CHART BOOK | September 2025

9

June 2020

KEY EXHIBITS

MOFSL’s 1QFY26 earnings were modest yet resilient



The aggregate earnings of the MOFSL Universe companies grew 11% YoY (vs. our est. of 9% YoY) in 1QFY26.



Excluding Financials, earnings for the MOFSL Universe grew 13% YoY (est. +14% YoY), whereas barring global commodities (i.e., Metals and

O&G), the MOFSL Universe reported 9% YoY earnings growth (est. +6% YoY).

Sector-wise 1Q performance of the MOFSL Universe companies (INR b)

Sector

(no of companies)

Automobiles (26)

Capital Goods (13)

Cement (11)

Chemicals (12)

Consumer (21)

Consumer Durables (5)

EMS (7)

Financials (62)

Banks-Private (12)

Banks-PSU (6)

Insurance (8)

NBFC - Lending (22)

NBFC-Non Lend. (14)

Healthcare (26)

Infrastructure (3)

Logistics (8)

Media (3)

Metals (11)

Oil & Gas (15)

Ex OMCs (12)

Real Estate (13)

Retail (22)

Staffing (4)

Technology (13)

Telecom (5)

Utilities (8)

Others (23)

MOFSL Universe (311)

Ex Financials (249)

Ex Metals & Oil (285)

Nifty (50)

Sales

Jun-25

3,203

990

661

169

975

199

186

4,132

934

876

1,775

472

74

930

44

177

46

3,008

7,741

3,579

148

621

108

2,014

768

803

739

27,662

23,530

16,913

13,970

Chg. % QoQ Chg. % YoY

-4.8

-22.3

-4.6

-2.3

8.9

-14.9

8.7

-12.4

1.0

-3.1

-24.4

0.9

7.0

1.5

-10.9

2.3

4.8

-5.5

-3.6

-7.7

-17.2

10.8

1.3

0.1

2.5

-0.7

-6.8

-5.0

-3.6

-5.6

-4.9

4

14.6

15

3.4

8

3.4

66

5.9

4

-0.4

8

15.7

17

10.3

-4

19.1

-1

3.6

0

0.5

17.8

14

8.5

5

20.1

3

16

5.3

5.2

8.4

5.8

Var. over

Exp. %

2.7

0.8

0.4

-5.1

2.3

-1.4

9.9

0.2

0.7

-0.8

0.1

1.6

-0.6

0.4

-3.1

1.7

-3.1

1.3

3.5

-5.7

-9.8

1.5

-0.6

-0.3

0.9

-4.5

0.2

1.4

1.7

0.5

-0.5

Jun-25

378

119

115

32

222

20

10

1,935

822

661

42

371

39

226

12

70

9

587

1,001

702

36

68

3

441

391

267

123

6,065

4,130

4,477

3,802

EBITDA

Chg. % QoQ Chg. % YoY

-18.1

-40.3

-1.9

3.1

8.7

-25.2

-18.7

4.9

21.8

-1.6

-46.3

-3.4

8.6

3.3

-12.1

5.6

34.1

-4.0

0.1

-3.7

-26.1

17.0

-7.5

-1.3

2.1

0.9

-19.3

-1.7

-4.5

-1.8

0.8

-13

16.2

41

7.6

1

3.3

66

15.7

23

10.0

13

11.5

18

9.9

0

24.9

0

7.3

17

1.6

3.2

18

10.6

4

28.5

-1

11

11.2

9.2

10.5

10.3

Var. over

Exp. %

-2.1

1.7

2.1

2.3

-0.1

-1.7

13.0

9.4

18.0

7.5

-0.8

-1.5

0.7

2.4

-0.5

2.4

-7.8

1.7

-6.4

-3.3

-28.5

5.3

-7.5

-1.9

1.4

-6.3

-2.7

1.3

-2.1

3.1

3.9

Jun-25

229

81

49

19

157

14

5

1,203

430

372

134

232

35

140

5

42

6

283

471

309

34

28

2

316

16

107

42

3,249

2,046

2,496

2,003

PAT

Chg. % QoQ Chg. % YoY

-18.9

-41.2

-0.8

7.2

9.9

-25.8

-23.2

-6.8

4.9

-9.7

-37.4

3.4

16.9

0.9

-19.9

3.1

27.2

-9.1

-1.0

-4.6

-14.8

27.2

-8.0

0.6

218.3

-7.3

-34.5

-6.8

-6.8

-7.6

-2.1

-3

17.7

51

14.0

2

1.0

58

5.9

1

7.2

6

13.5

17

10.8

13

24.9

13

3.8

27

-0.5

15.9

27

26.2

7

LP

14

5

10.5

13.4

8.6

8.2

Var. over

Exp. %

7.5

5.4

8.7

3.7

-0.7

-2.4

8.1

3.1

3.3

2.3

1.2

4.7

5.3

0.2

7.3

4.1

-3.0

8.5

-10.8

-8.9

-17.4

3.2

-7.9

1.2

61.0

2.0

-5.1

0.9

-0.3

2.7

3.4

Detailed report

CHART BOOK | September 2025

10

June 2020

KEY EXHIBITS

Nifty-50 delivers a fifth successive quarter of single-digit PAT growth



Sales/EBITDA/PBT/PAT growth for Nifty constituents was in line at +6%/+10%/+7%/+8% YoY in 1QFY26. Excluding Metals & O&G, profits for Nifty

constituents were up 9% YoY (vs. our est. of +4% YoY).



Among Nifty constituents, 48% exceeded our PAT estimates, while 14% missed our estimates.

Nifty sales up 6% YoY (in line) in 1QFY26

46

Nifty EBITDA up 10% YoY (est. 6%)

44

18

3

-3

-24

27

25 23

36

28

18 13

7 7 7 8 8 4 7 7

14

25

22

17 16 19

6

5

14

11 14 11

18

9 13 9 8 9 7

10

-13

Nifty PAT up 8% YoY (est. 5%)

115

76

40

9

18

27

24

32

13

12

15

22

23

19

14

9

7

4

3

8

-36

Source: MOFSL

CHART BOOK | September 2025

11

June 2020

KEY EXHIBITS

Nifty-500 earnings growth gathers pace in 1Q, midcaps lead again



Nifty-500 companies delivered a healthy performance in 1QFY26. Aggregate sales/EBITDA/adj. PAT of Nifty-500 companies grew 5%/11%/10%

YoY to INR34.7t/INR7.6t/INR4.0t in 1QFY26.



The 1Q earnings performance of Nifty-500 was led by midcap companies. Aggregate earnings of the Nifty Midcap-150 grew 17% YoY,

outperforming the Nifty-100 (8%) and the Nifty Smallcap-250 (6%).

Nifty-500 aggregate PAT grew 10% YoY to INR4.3t

PAT Nifty- 500 (INR t)

52

44

YoY gr (%)

45

28

15

4

-1

8

9

10

PAT growth, excluding BFSI, jumped to 12% YoY

PAT Nifty-500 Ex-BFSI (INR t)

61

32

9

-3

-9

6

10

12

PAT growth, ex- Metals and O&G, grew by 7% YoY

PAT Nifty-500 Ex-metals and O&G (INR t)

YoY gr (%)

YoY gr (%)

53

28

24

24

16

10

13

9

7

3.5 3.5 3.5 3.9 3.7 3.4 3.8 4.3 4.0

2.3 2.2 2.1 2.4 2.2 2.0 2.3 2.6 2.5

2.5 2.6 2.7 3.1 3.0 2.9 3.1 3.4 3.1

Nifty-100 PAT grew 8% YoY in 1QFY26

55

38

Nifty-100 PAT (INR b)

28

16

4

YoY gr (%)

5

Nifty Midcap-150 PAT grew 17% YoY

Nifty Smallcap-250 reported PAT growth of 6% YoY

Nifty Midcap-150 PAT (INR b)

69 74

35

1

13

7

31

YoY gr (%)

29

Nifty Smallcap-250 PAT (INR b)

19

28

32

-13

1

YoY gr (%)

0

-1

8

17

8

62

9

6

Note: PAT figures represent the aggregate of index constituents

Source: MOFSL, Cline

CHART BOOK | September 2025

12

June 2020

KEY EXHIBITS

Large-cap valuations near their average; small- and mid-caps remain stretched



The Nifty-50’s one-year forward P/E stood at 20.6x, near its long-period average (LPA) of 20.7x.



In contrast, the Nifty Midcap-100 and Nifty Smallcap-100 indices are trading at 26.1x and 24.9x, representing premiums of ~14% and ~50% to

their respective LTAs.

One-year forward P/E trends across the Nifty-50, Nifty Midcap-100, and Nifty Smallcap-100 indices (x)

Nifty-50 P/E (x)

22.8

21.6

21.4

22.4

21.6

Average 20.7x

20.0

19.3

19.2

18.7

19.1

22.4

21.4

20.6

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25

FY26 YTD

Aug-25

Nifty Midcap-100 P/E (x)

31.2

27.8

Average 22.9x

22.9

18.6

19.7

17.1

13.0 13.0

24.8

26.2

22.3

25.4

26.1

Nifty Smallcap-100 PE (x)

25.6

22.7

20.5

18.6

Average 16.6x

17.7

16.0

13.4 13.5

16.2

15.5

24.9

17.2 16.9

Note: The bars represent 12-month average of one-yr fwd P/E and as of 31

st

Aug’25

CHART BOOK | September 2025

13

June 2020

KEY EXHIBITS

Auto and Pvt. Banks trade below their average valuations



Valuations have been trading below the 10-year average for Automobiles and Pvt. Banks, while they have remained above the 10-year average

for Capital Goods, Consumer, Healthcare, Technology and Metals, and at the average for O&G.

Auto P/E (x)

Average 25.9

Pvt. Banks P/E (x)

Average 21.1x

Capital Goods P/E (x)

Average 25.1x

Consumer P/E (x)

Average 42.0x

Healthcare P/E (x)

Average 27.0x

Technology P/E (x)

Average 21.1x

Pvt. Banks P/B (x)

Average 2.5x

Metals P/B (x)

Average 1.5x

Average 1.6x

O&G P/B (x)

Note: The bars represent 12-month average of one-year fwd P/E and P/B across MOFSL Universe sectors and as of 31

st

Aug’25; Green and red bars represent latest

sectoral valuations below and above the 10-year average, respectively.

CHART BOOK | September 2025

14

June 2020

Macro, Markets, and More…

CHART BOOK | September 2025

15

June 2020

India underperforms global equities MoM and YTD

MoM performance of global equity indices in USD terms (%)

9

MoM change (%)

9

8

7

3

2

2

2

1

1

-2

-2

CY25YTD performance of global equity indices in USD terms (%)

41

35

CY25YTD change (%)

34

27

21

18

18

17

15

13

10

0

CHART BOOK | September 2025

16

June 2020

Broad-based market decline; Auto leads, Consumer sees modest gains MoM

Sectoral performance MoM (%): Broad-based weakness visible during the month, while Autos posted sharp gains

6

1

MoM change (%)

-1

-3

-4

0

-1

-1

-1

-2

-4

-4

-4

-4

-5

Sectoral performance in CY25YTD (%): Auto and Metals outperform, while Technology and Real Estate remain the weakest

CY25YTD change (%)

9

3

6

5

5

3

-1

-8

-3

-3

-4

-7

-11

-17

-19

Note: (*) represents BSE Capital Goods index

CHART BOOK | September 2025

17

June 2020

About 58% of the Nifty constituents end lower in Aug’25



Among Nifty constituents, 29 stocks closed lower MoM in Aug’25. Auto stocks posted notable gains, whereas Shriram Financials and Adani

Enterprise were the key laggards.



About 31 Nifty constituents trade higher in CY25YTD. Maruti, SBI Life Ins., and Bajaj Finance are the top gainers, whereas Trent, TCS, and HCL

Tech are the key laggards.

Best and worst Nifty performers on MoM basis (%)

19

17

12

8

8

6

5

5

3

3

-1

-4

-4

-5

-5

-6

-6

-7

-7

-8

-8

Best and worst Nifty performers in CY25YTD (%)

36

30

29

27

26

25

22

22

19

17

3

-11

-11

-13

-15

-17

-22

-23

-24

-25

-26

CHART BOOK | September 2025

18

June 2020

About 30% of the BSE-200 constituents end higher in Aug’25



In Aug’25, only 60 BSE-200 stocks closed higher. Uno Minda, TVS Motors, and Hyundai Motors gained the most during the month.



About 93 BSE-200 constituents trade higher in CY25YTD. Aditya Birla Capital, Max Financials and UPL are the top gainers.

Top gainers within BSE-200 on MoM basis (%)*

23

17

14

14

11

10

10

8

8

7

6

6

5

5

5

5

4

4

4

4

4

3

3

2

2

2

2

2

1

1

-2

Top gainers within BSE-200 CY25YTD (%)*

56

44

43

41

41

38

36

34

33

30

28

27

24

24

23

23

23

22

22

21

21

20

19

19

17

17

17

15

15

14

1

*The list excludes Nifty-50 constituents.

CHART BOOK | September 2025

19

June 2020

About 70% of the BSE-200 constituents end lower in Aug’25



In Aug’25, 140 companies closed lower. Thermax, Kalyan Jewellers, and Balkrishna Industries were among the key laggards.



About 106 of the BSE-200 companies trade lower in CY25YTD. UCO Bank , Central Bank and Oracle Financial are the key laggards.

Key laggards among the BSE-200 constituents on MoM basis (%)*

-2

-11 -11

-11

-10 -10 -10

-13 -13 -13 -12

-14 -14 -14 -14

-19 -15

-9

-9

-9

-9

-9

-8

-8

-8

-7

-7

-7

-7

-7

-7

Key laggards among the BSE-200 constituents in CY25YTD (%)*

1

-19 -18 -18 -18

-22 -22 -22 -21 -21 -21 -20 -19

-23 -23

-26 -26 -24 -24 -24 -23

-30 -30 -30 -28 -28

-36

-35 -35 -35 -34

*The list excludes Nifty-50 constituents.

CHART BOOK | September 2025

20

June 2020

Auto gains weight sharply, while Private Banks’ weight declines



In Aug’25, the weights of Automobile, Consumer and Retail rose 60bp, 30bp, and 20bp MoM, whereas Private Banks saw a significant decline of

100bp MoM among the Nifty-50 constituents.

Nifty sectoral weights (%)

Sector

Automobiles

Banks – Private

Banks – Public

NBFC + Insurance

Capital Goods

Dec’08

2.5

5.0

5.4

2.3

7.7

Dec’12

8.8

16.9

4.7

7.9

5.9

Dec’20

5.4

24.7

1.8

12.3

2.6

Dec’21

5.0

21.9

2.3

11.4

3.0

Weightage in the Nifty (%)

Dec’22

Dec’23

5.3

24.2

2.9

10.6

3.1

6.5

28.2

2.6

4.5

4.4

Dec’24

7.4

27.1

2.9

4.6

5.0

Mar’24

7.6

25.6

2.9

5.0

4.5

July’25

7.2

28.9

2.7

6.2

5.0

Aug’25

7.8

27.9

2.8

6.2

5.0

Cement

Consumer

Healthcare

Metals

Oil and Gas

Reliance

Retail

Telecom

Technology

Utilities

Miscellaneous

Nifty

1.7

6.5

2.6

4.8

24.5

10.6

0.0

11.6

9.0

13.3

3.3

100.0

4.2

12.3

5.0

3.8

12.3

7.4

0.0

2.0

11.4

4.5

0.5

100.0

2.2

10.4

3.6

2.0

12.5

10.7

1.1

2.0

16.3

2.1

1.0

100.0

2.4

9.4

3.4

2.9

12.3

10.8

1.4

2.1

19.1

2.1

1.2

100.0

1.8

10.3

3.8

2.9

12.1

11.0

1.4

2.5

14.0

2.5

2.6

100.0

2.1

10.8

4.0

3.0

10.5

9.2

1.6

2.7

13.6

3.6

1.9

100.0

2.1

9.0

4.2

2.7

9.2

7.8

2.8

4.0

14.1

3.6

1.4

100.0

2.0

9.5

4.4

2.9

11.9

10.2

1.6

3.2

13.0

3.9

1.9

100.0

2.2

7.7

3.8

2.9

9.2

8.4

2.2

4.6

10.4

3.3

3.4

100.0

2.3

8.0

3.7

3.0

9.1

8.3

2.4

4.7

10.5

3.3

3.4

100.0

Note: The merger of HDFC Bank and HDFC Ltd. resulted in a shift in weightage from NBFCs to private banks in CY23. Britannia and BPCL were replaced with Jio

Financials and Eternal in Mar’25

CHART BOOK | September 2025

21

June 2020

DII monthly inflows hit second-highest level, FII outflows intensify



DIIs invested a record USD10.8b, the second-highest monthly inflow and the strongest ever on a trailing 12-month basis, marking their 25

th

consecutive month of inflows. In contrast, monthly FII outflows accelerated, with net withdrawals of USD4.3b in Aug’25.



In CY25YTD, DIIs have invested USD59.4b, while FIIs have sold USD15.3b worth of Indian equities.



During CY21-CY25YTD, DII inflows have reached a record of ~USD189b, while net FII outflows stand at ~USD8b.

Monthly institutional flows (USD b)

Net FII (USD b)

7.0

1.7

2.3

4.0

0.5

-1.1

-3.0

3.1 3.3

1.4

5.9

1.3

0.2

1.3 1.7

2.4

6.8

-2.2

-5.4

-8.4

-10.9

-2.9

-4.3

5.3

3.0 2.4 3.4

3.2 3.1

1.7 1.6

6.7

Net DII (USD b)

12.8

10.0

7.4

5.8

3.4 2.8

3.8

5.3

7.9 8.5

4.3

10.8

7.1

-2.3

-2.7

-3.1

4.0

3.3

Yearly institutional flows (USD b)

Net FII(USD b)

14.2

3.8

23.4

21.4

Net DII (USD b)

62.9

59.4

-0.8

15.9

6.0

-17.0

-15.3

-5.0

12.1

32.2

22.3

-4.6

CHART BOOK | September 2025

22

June 2020

Institutional holdings: DIIs continue to lead institutional ownership



Strong domestic inflows and buoyant capital markets led to a historic shift in ownership, with DII holdings surpassing FII holdings in the Nifty-500

companies for the first time in Mar’25, inching further up in Jun’25.



Promoter holdings fell to an all-time low of 49.3% in Jun’25, while retail holdings remained stable.

Trends in FII/DII holdings for Nifty-500 (%)

FIIs

22.7

21.4 21.4

20.6

21.1

20.0 20.9

DIIs

Trends in FII/DII share as proportion of free float

FII proportion of free float (%) - LHS

46.9

18.6

19.7

19.0

19.2 19.4

18.8 18.8

27.7 28.2

23.6

25.2 25.9

43.2 42.7

42.0 42.4

30.6

42.7

35.5 36.2

DII proportion of free float (%) - RHS

38.0

38.3

17.6 17.7

14.0

13.0 13.6

12.5

14.9

14.0

14.8

30.9

39.7

38.7

38.7

41.1

28.7

37.3

37.2

11.4

DIIs continued to raise their stakes for the fifth consecutive quarter

Value USDB

1,346

14.3

11.4

1,300

15.7

12.5

21.4

1,647

15.7

1,844

Promoter

1,911

14.6

14.0

21.1

FIIs

1,655

13.7

14.9

20.0

DIIs

2,787

14.0

14.0

20.9

Public

2,824

14.6

14.8

18.6

3,219

12.3

17.6

19.7

4,759

4,327

12.4

19.2

4,848

12.4

19.4

18.8

14.8

13.6

20.6

12.3

17.7

19.0

13.0

21.4

22.7

18.8

51.7

50.4

50.0

51.0

50.3

51.5

51.1

51.9

50.4

51.0

49.5

49.3

Jun 15

Jun 16

Jun 17

Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Jun-24

Mar-25

Jun-25

CHART BOOK | September 2025

23

June 2020

Monthly average cash volumes remain flat, while F&O volumes rise



Monthly average cash volumes remained nearly flat MoM (+1% MoM) in Aug’25 at INR1.03t. Non-institutional participation declined 300bp

MoM, accounting for 44% of total cash volumes.



Monthly average F&O volumes rose 9% MoM, reaching the highest level in CY25, though still down 23% from the Sep’24 peak.

Monthly average cash volumes (INR b)

1750

1350

950

44

550

150

40

30

Monthly Avg. Cash Volume (INR b)

Non Institution % to Cash Volume (RHS)

70

60

50

Monthly average F&O volumes (INR t)

Monthly Avg F&O Volume (INR t)

520

390

Cash % to Total Volumes

2.0

1.5

260

130

0

1.0

0.5

0.3

0.0

CHART BOOK | September 2025

24

June 2020

India-US 10-year yield spread widens marginally after hovering near historical lows



India’s 10-year government bond yield expanded 20bp MoM to 6.6% in Aug’25, while the US yield contracted 10bp MoM to 4.2%. As a result, the

yield spread expanded 30bp MoM to 2.3% in Aug’25.

India-US 10Y bond yield (%)

India 10-year yield

12.0

India fiscal tightening,

strong economic growth led by

the global book, and Fed

raising rates

GFC

Fed easing,

US-Sino trade

war, and

Covid-19

outbreak

Fed starts easing

rates, geopolitical

uncertainty

sustains, bond

yields moderate

from the highs

6.6

US 10-year yield

Fed cuts rates to zero

after the GFC

Fed raises rates

9.0

Fed tightening,

geopolitical

uncertainties,

sharp rise in bond

yields

6.0

2.2

3.9

6.9

6.0

4.4

2.3

4.2

3.0

0.0

Source: Bloomberg, MOFSL

CHART BOOK | September 2025

25

June 2020

Forex reserves remain stable MoM, INR hits all-time low



India’s forex reserves stood at USD691b in Aug’25 (up 10% from the Jan’25 low of USD 631b), near the all-time high of USD705b seen in Sep’24.



On the currency front, INR weakened 1% MoM (depreciating 5% YoY) to an all-time low of 88.2 against USD.

Forex reserves (USD b)

Forex Reserves (USD b) (RHS)

USDINR

95

80

INR had its best run

during the CY03-07 global

bull run when GDP

growth and corporate

earnings growth were

high and the twin deficits

– CAD and FD – were

among the lowest in two

decades

Eurozone crisis, taper tantrum, and

devaluation of RMB – the taper tantrum

episode in CY13 drove the INR down

sharply to 68 from 55 in just four

months. This was a period of high

inflation and INR depreciation

Low inflation has characterized

the period post CY15. INR was

relatively less volatile despite

several global headwinds. Forex

reverses were surging

Pandemic impact, geopolitical

tensions led to global volatility, high

liquidity, followed by quantitative

tightening, sharp currency

depreciation, but resilient economy

800

600

65

Pre GFC peak

in FX reserves

400

50

200

35

0

Source: Bloomberg, MOFSL

CHART BOOK | September 2025

26

June 2020

Notable reports from MOFSL’s research desk published in Aug’25

Initiating Coverage | HDB Financial Services| Granular Strategy, Scalable Execution

Report link>>



HDB Financial Services (HDB) is the seventh largest diversified, retail-focused NBFC in India with an AUM of ~INR1.1t as of Jun’25. The

company delivered a ~20% AUM CAGR over FY22-FY25 and has a wide nationwide footprint.



Backed by HDFC Bank’s institutional ethos and a seasoned management team, the company is positioned to deliver 19% AUM CAGR

(over FY25- 28E) with expanding RoAs (from 2.2% in FY25 to 2.6% by FY28) — without compromising on asset quality or governance.



With the benefits of scale now beginning to kick in, we project HDB to deliver a PAT CAGR of ~26% over FY25-FY28 and an RoA/RoE of

2.6%/16.5% by FY28, supported by a gradual decline in credit costs and higher operating leverage. We initiate coverage on HDB with a

Neutral rating and a TP of INR860 (premised on 2.7x Sep’27E P/BV).



Key risks: 1) execution risk in translating scale into sustained profitability, as operating efficiency metrics currently lag peers, 2)

vulnerability to industry asset quality cycles, and 3) the RBI’s draft circular issued in Oct’24 may require HDFC Bank to reduce its stake in

HDB to ~20%, potentially altering the ownership structure.

Initiating Coverage| TECHNOLOGY | AUTO ER&D | THEMATIC: An incomplete revolution

Report link>>



Three structural forces are reshaping the global mobility landscape: 1) The shift toward CASE (connected, autonomous, shared, electric)

mobility is accelerating the role of software in vehicles; 2) OEMs are moving from decentralized architectures to centralized domain

controllers, paving the way for software defined vehicles (SDVs); 3) Regulatory mandates for greener mobility are compelling automakers

worldwide to invest in electric powertrains and sustainability-focused innovations.



However, we note that enthusiasm for electric vehicles (EVs) has hit a snag, and with it, the companies’ ability to invest heavily in SDVs in

recent quarters. For the top three automotive players in the engineering research and development (ER&D) industry, average organic

YoY CC revenue growth has slowed from 17% over FY21-FY23 to 12% over FY24-25. Despite the recent moderation in capex cycles

among Western OEMs, the long-term outlook remains robust. Asian OEMs are pivoting toward hybrids and localized strategies, while

global players are recognizing software as the key competitive frontier. This backdrop offers tailwinds for specialized engineering service

players with domain depth, co-development capabilities, and global delivery footprints. We initiate coverage on KPIT Technologies (with

a Buy), TATA Technologies (with a Sell), and TATA Elxsi (with a Sell)

India Strategy| Ownership analysis – DIIs fortify their grip!

Report link>>



Markets gain despite headwinds:

The Indian equity markets staged a sharp recovery in 1QFY26 after hitting lows in Mar’25, despite

navigating multiple headwinds during the period. The quarter was characterized by heightened geopolitical tensions, modest earnings

prints, and weak consumption trends.



DIIs strengthen their grip on Indian Equities:

Defying the market volatility, DIIs invested USD19.7b into Indian equities, while FIIs added

USD5.4b during 1QFY26. Further, sustained retail participation and record monthly SIP flows of over USD3b have propelled domestic

institutional ownership to new highs. This structural shift in institutional ownership, which has gained momentum since 2021, continues

to strengthen as DII holdings reach new peaks and surpass FII holdings in Nifty 500 companies.



Promoter holdings dip:

DII ownership in Nifty-500 rose 170bp YoY (+20bp QoQ) to 19.4%, whereas FII ownership remained unchanged

at 18.8% (-20bp YoY and flat QoQ). Promoter holdings dropped to an all-time low of 49.3% (-170bp YoY and -20bp QoQ), while Retail

holdings remained stable at 12.4% (+10bp YoY, flat QoQ) as of Jun’25.

CHART BOOK | September 2025

27

June 2020

Valuations: Key observations

CHART BOOK | September 2025

28

June 2020

Valuations: Nifty’s 12-month trailing P/E declines MoM



The 12-month trailing P/E for Nifty-50, traded at 23.2x, was slightly above its LTA



At 3.4x, the 12-month trailing P/B was 13% above its historical average of 3.1x.

12-month trailing Nifty P/E (x)

28

25

22

19

16

23.2

10 Year Avg: 22.9x

12-month trailing Nifty P/B (x)

4.0

3.5

3.0

2.5

2.0

10 Year Avg: 3.1x

3.4

CHART BOOK | September 2025

29

June 2020

Valuations: Nifty’s 12-month forward P/E trades above its LTA



Nifty’s 12-month forward P/E at 20.6x was marginally below its LTA of 20.7x, but it was down 15% from the Sep’24 high.



At 3.1x, the 12-month forward P/B traded at a 12% premium to its LTA of 2.8x.

12-month forward Nifty P/E (x)

26

23

19

16

12

20.6

10 Year Avg: 20.7x

12-month forward Nifty P/B (x)

3.8

3.3

2.8

2.3

1.8

3.1

10 Year Avg: 2.8x

CHART BOOK | September 2025

30

June 2020

EY/BY ratio remains flat MoM



India’s 10-year bond yield stood at 6.6% (up 20bp MoM). Consequently, the earnings yield to bond yield (EY/BY) ratio remains flat and near its

LTA on both trailing and forward basis.

Trailing earnings yield/G-Sec yield (x)

1.0

0.9

0.7

0.6

0.4

Earnings yield (12-month trailing)/G-Sec yield

15 Year Avg: 0.67%

0.65

Forward earnings yield/G-Sec yield (x)

1.2

1.0

0.9

0.7

0.5

Earnings yield (12-month forward)/G-Sec yield

EY/BY spiked sharply

during the GFC

15 Year Avg: 0.73%

It remained below 1x for last six

years, except for a brief period

during demonetization

0.74

CHART BOOK | September 2025

31

June 2020

India’s market cap-to-GDP ratio remains high



India's market cap-to-GDP ratio is projected at 122% in FY26, lower than the peak of 146% in Sep’24 but above the Feb’25 low of 120%.



The market cap-to-GDP ratio for broader markets continues to trade at a significant premium to the long-term average.

Market cap-to-GDP ratio (%) - Overall

GFC: Peak of 149% in Dec’07

Average of 87% for the period

Nominal GDP growth in FY25/FY26E: 9.8%/10.5%

129

105

84

84

56

97

Lowest since

126

103

113

97

122

90

71

64

66

82

84

69

79

80

57

Market cap-to-GDP ratio (%) Top 100 Large-caps

Average of 62% for 15 years

Market cap-to-GDP ratio (%) 101 to 250

th

Mid-caps Market cap-to-GDP ratio (%) Small-caps, beyond 250

th

Average of 14% for 15 years

Average of 12% for 15 years

74

78

60

50 55

57 57

43

66

84

78

23

24

24

16

10

8

11

13

10

5

12

14

73

12

13

14

13

9

23

24 25

17 18 16

10

CHART BOOK | September 2025

32

June 2020

Top ideas: MOFSL

Company

Mcap

(USDb)

CMP

FY25

1,889

1,398

3,600

3,198

1,594

12,637

3,629

314

369

3,278

1,481

1,193

759

16,681

2,841

56

763

1,724

4,470

44,180

6,124

2,852

1,288

81

30.3

66.8

106.8

98.7

47.1

207.6

42.3

0.6

7.2

57.1

47.9

28.7

11.8

EPS (INR)

FY26E

47.4

72.6

130.5

119.5

51.2

305.9

54.6

1.2

8.2

67.1

61.3

37.9

13.4

FY27E

63.9

84.4

155.1

136.7

61.1

382.9

64.2

3.9

9.8

79.6

78.3

40.2

16.1

EPS

CAGR (%)

FY25-27E FY25

45.2

12.4

20.5

17.7

13.8

35.8

23.2

157.3

16.5

18.1

27.8

18.5

16.8

62.4

20.9

33.7

32.4

33.8

60.9

85.8

534.3

51.0

57.5

30.9

41.6

64.2

PE (x)

FY26E

39.8

19.3

27.6

26.8

31.1

41.3

66.5

265.2

44.9

48.8

24.2

31.5

56.8

FY27E

29.6

16.6

23.2

23.4

26.1

33.0

56.5

80.7

37.6

41.2

18.9

29.7

47.0

FY25

9.3

3.4

5.1

6.2

5.3

5.3

27.8

9.3

13.7

15.7

4.8

5.7

9.7

PB (x)

FY26E

8.0

3.1

4.5

5.3

4.7

4.8

21.5

9.0

10.8

12.4

4.7

4.9

8.3

FY27E

6.2

2.7

4.0

4.5

4.1

4.4

17.0

8.1

8.6

9.9

4.5

4.3

7.1

FY25

18.0

18.0

16.0

20.8

16.6

9.3

35.8

2.1

26.8

30.7

15.7

14.6

16.3

ROE (%)

FY26E

22.4

17.0

17.3

21.3

15.9

12.2

36.5

3.4

24.0

28.4

19.6

16.7

15.7

FY27E

25.8

17.3

18.2

20.7

16.7

14.0

33.5

10.5

22.9

26.8

24.2

15.4

16.3

Preferred large cap stocks

Bharti Airtel

129.8

ICICI Bank

113.0

Larsen & Toubro

55.5

M&M

46.5

Sun Pharma

43.1

UltraTech Cem.

41.8

Titan Company

36.7

Eternal

32.4

Bharat Electronics

30.2

TVS Motor Co.

17.5

Tech Mahindra

16.6

Lodha Developers

13.7

Indian Hotels

12.4

Preferred Midcap/Smallcap stocks

Dixon Tech.

11.4

SRF

9.6

Suzlon Energy

8.8

Jindal Stainless

7.6

Coforge

6.6

Supreme Inds.

6.5

Page Industries

5.6

Kaynes Tech

4.7

Radico Khaitan

4.3

UTI AMC

1.9

Niva Bupa Health

1.7

117.2

46.1

1.1

30.5

25.2

75.6

652.9

45.8

25.8

63.9

1.2

173.5

68.7

1.2

36.1

46.4

85.0

736.4

81.5

40.1

68.8

0.6

275.2

92.6

2.3

44.5

58.9

119.6

843.3

132.9

51.4

79.8

1.8

53.3

41.8

44.7

20.7

52.9

25.7

13.7

70.4

41.1

11.8

23.9

142.4

61.7

52.4

25.0

68.4

59.1

67.7

133.8

110.6

20.2

69.7

96.1

41.3

45.3

21.1

37.1

52.6

60.0

75.2

71.2

18.7

134.1

60.6

30.7

25.0

17.2

29.3

37.4

52.4

46.1

55.5

16.1

45.4

33.4

6.7

12.6

3.8

8.9

10.0

35.0

13.8

14.2

3.2

4.9

25.1

6.0

9.9

3.2

8.0

9.0

29.0

7.9

12.2

3.0

3.8

17.9

5.1

7.1

2.8

7.1

7.7

24.2

6.7

10.4

2.9

3.5

30.0

11.4

29.4

15.1

13.9

17.8

51.8

11.0

12.8

16.0

7.9

29.8

15.3

24.5

15.3

17.1

18.0

48.3

13.9

17.2

16.5

3.2

34.5

18.0

33.0

16.1

20.7

22.2

46.1

16.4

18.7

18.2

8.1

CHART BOOK | September 2025

33

June 2020

NOTES

CHART BOOK | September 2025

34

June 2020

Quant Research & India Strategy Gallery

CHART BOOK | September 2025

35

June 2020

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

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with the investment rating legend.

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CHART BOOK | September 2025

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CHART BOOK | September 2025

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June 2020