Indian stock market: MOSL says correction nearing its ends, lists top sectoral & stock ideas | Stock Market News

The Indian equity markets gained for the third straight session on Wednesday, March 19. This comes after a sharp correction in recent months, with the Nifty-50 declining by approximately 16 per cent since September 2024.

In a recent note, brokerage house Motilal Oswal Financial Services (MOSL) believes that despite the recent turbulence, several indicators point toward a potential rebound. With easing valuations, fiscal and monetary support, and promising growth prospects for FY26, the Indian equity market offers selective investment opportunities.

Correction Deepens but Nearing Historical Median

According to MOSL, the Nifty 50’s 16 per cent decline since September 2024 is in line with the median drawdown of 17 per cent seen in previous correction phases over the past decade, excluding black-swan events. The recent sell-off was primarily driven by sustained FII outflows, geopolitical tensions, and weaker-than-expected corporate earnings in FY25. Despite these headwinds, MOSL believes the correction is nearing its end, presenting fresh investment opportunities.

MOSL also highlighted that the correction has made valuations more appealing, particularly in large-cap stocks. The Nifty 50 is currently trading at nearly a 10 per cent discount to its long-term average, making entry points for selective investments more attractive. While small- and mid-cap stocks continue to trade at elevated levels compared to historical averages, large-caps present better risk-reward potential.

Strategic Investment Outlook

FII Outflows Losing Impact: MOSL observes that while FII outflows have been significant—amounting to approximately USD28 billion—their impact on Indian equities appears to be waning. This is due to steady DII inflows of around USD44 billion, which have acted as a counterbalance, offering market stability despite foreign selling pressure.

Earnings Recovery Expected in FY26: MOSL expects corporate earnings growth to rebound in FY26. While FY25 earnings growth has been modest at approximately 4 per cent year-on-year, FY26 Nifty PAT is projected to grow by around 16 per cent. This anticipated earnings recovery, combined with stable valuations, makes large-caps particularly attractive. Historically, large-cap stocks have demonstrated greater resilience during periods of economic uncertainty and volatility.

Sectoral Insights

MOSL recommends an overweight allocation to large-cap stocks, citing their stability and favourable risk-reward potential. The firm prefers BFSI, IT, and Healthcare sectors, given their earnings visibility and long-term growth drivers.

Technology Sector Faces Challenges: MOSL pointed out that the technology sector is struggling due to weak discretionary spending, geopolitical instability, and a cautious enterprise outlook. While earlier projections suggested a recovery in IT spending by CY25, recent trends indicate that this revival may take longer.

Within the IT sector, MOSL has downgraded large-cap players like Infosys and Wipro, citing slower-than-expected growth recovery. Infosys now holds a ‘Neutral’ rating, while Wipro has been downgraded to ‘Sell’ due to ongoing risks to its FY26 growth estimates. On the flip side, MOSL has upgraded Tech Mahindra to ‘Buy’, driven by encouraging signs of business transformation, margin expansion, and strong traction in its BFSI segment. TCS and LTIMindtree remain MOSL’s preferred large-cap picks for their relative stability and favorable risk-reward profile. Among mid-tier IT names, Coforge and Persistent stand out for their consistent 20 percent-plus earnings growth.

Auto: MOSL highlighted Tata Motors as a key player in the auto sector, owing to its premium brand positioning and focus on electric vehicles (EVs). The company’s ‘House of Brands’ strategy has successfully differentiated models like Range Rover, Defender, and RR Sport in the luxury segment. Although EV adoption has slowed in key markets, Tata Motors remains well-positioned for the transition. MOSL expects the company’s focus on profitable growth, rather than volume expansion, to sustain stable margins despite near-term challenges.

Healthcare Sector Shows Resilience: MOSL pointed to the healthcare sector’s strong performance, with IPCA, JB Chemicals, and Zydus outperforming peers. These companies have benefited from robust growth in Cardiac, Gastro, and Urology therapies. In contrast, the life insurance sector has faced headwinds, with LIC reporting a 17.4 percent year-on-year decline in WRP in February 2025. However, MOSL believes private insurers such as HDFC Life and SBI Life remain relatively strong and continue to be preferred investment options.

Top Stock Picks

Top Large-Cap Picks:

Reliance Industries: A diversified leader across energy, telecom (Jio), and retail, set to benefit from green energy initiatives and digital expansion.

Bharti Airtel: Positioned for growth with strong 5G investments and rising data consumption driving higher ARPU.

Larsen & Toubro (L&T): A key infrastructure player expected to gain from India’s infrastructure push, backed by a strong order book.

Maruti Suzuki: India’s largest automaker with a robust product pipeline and growing hybrid/EV portfolio.

Titan Company: A market leader in jewelry and premium watches, supported by brand strength and expansion plans.

Mid-Tier Growth Opportunities:

HDFC AMC: A leading mutual fund player, poised to benefit from rising retail investments and consistent SIP inflows.

Coforge: A mid-tier IT firm with strong digital transformation capabilities and consistent 20 percent-plus earnings growth.

Persistent Systems: A performer in digital transformation services with a solid track record in cloud and data solutions.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.