Latest news with #GautamDuggad
Time of India
5 days ago
- 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
5 days ago
- 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.
Time of India
16-06-2025
- Business
- Time of India
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.
Time of India
13-06-2025
- Business
- Time of India
Expect a lot of wealth creation in equity market over next 5 years: Gautam Duggad
Gautam Duggad , Head Of Research, Director - Institutional Equities, Motilal Oswal Financial Services , projects a 10-11% compound nominal GDP growth. Corporate India's earnings may grow at 14-15% between 2025 and 2027. This growth could continue until 2030. Nifty 500 companies' profits surged from Rs 4 lakh crore in 2020 to Rs 16 lakh crore in 2025. Continued compounding suggests significant wealth creation in the Indian equity market . Recently there was a very interesting note from your team which says that the corporate profit to GDP number is standing tall at a 17-year high. Help us understand what this ratio really implies and also what implications it can have on the Indian equity markets. Gautam Duggad: We just put out a note on corporate profit to GDP which is our annual signature note. Allow me to explain it in a little bit granular fashion. Corporate profit to GDP basically reflects on the underlying earning cycle. In 2020, in the middle of COVID, we had a corporate profit to GDP ratio of 2.1%, which is where it bottomed out. In 2008, at the previous peak of earnings, the corporate profit to GDP was somewhere close to 5.1%. Right now, from 2.1% in 2020, we have already reached 4.7%. This is at a new high post the 2008 peak. This does not include unlisted names. This is just the Nifty 500 companies. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like One of the Most Successful Investors of All Time, Warren Buffett, Recommends: 5 Books for Turning... Blinkist: Warren Buffett's Reading List Click Here If you add up all the listed companies, this ratio is somewhere close to 5.1%. And last year, the corporate profit to GDP performance was trending close to 4.7% and then, if you added the unlisted and listed, it was about 6.7% or 6.8%. The previous peak of corporate profit to GDP, summing up the entire listed and unlisted universe, was 7.9% in 2008. We bottomed out at somewhere around 1.92% in 2020. Right now, just the listed data is available for FY25 within which 4.7% is Nifty 500 companies and the rest of the listed companies put together is 0.4%, so we are at 5.1% in FY25. As the unlisted data comes by September, we will update that. For reference, in FY24, the listed plus unlisted stood at 7.3%. So, I would think that this year that number would have moved closer to 7.5%, but we are still 40-50 basis points below the previous peak. So, the interesting thing to note here is that while we are already in the middle of an earnings up cycle which began in 2020, there are still a couple of years left for this entire up cycle to play out. Given that there is a preponderance of a lot of sectors which were hitherto not listed and they are listed now, so possibility of this ratio in the foreseeable future crossing even 8-8.5% is very much there. The other interesting thing to note from this report is that the underlying nominal GDP as such does not have too much of a bearing basically on the profit or corporate India's earnings performance. If you look at 2003 to 2008 which was the previous big bull cycle on earnings, the underlying nominal GDP compounded at close to 15%, earnings compounded at 30%. Live Events You Might Also Like: Jyotivardhan Jaipuria on where to put money on the table and where to take it off From 2008 to 2020, the 12 years saw an earnings recession where the underlying nominal GDP compounded at somewhere close to 12.5% CAGR but the corporate earnings compounded at a miserly 4%. We were obviously impacted with so many issues in that 10-year period. Now again from 2020 to 2025, the nominal GDP has compounded at 10.5%, but the earnings have compounded at 30%. So, the underlying GDP has broadly trended in that 10%, 12%, 14% band over a 15-17-year period. But corporate earnings have had a massive cycle of 30%, then 4%, and is now back at 30%. A lot of the high beta cyclical sectors have compounded this rise from 2.1% to 4.7% in the five years including metals, oil and gas. The biggest contributor has been financials which is where the earnings up cycle has been massive post 2020. If I look at the contribution of BFSI alone, the BFSI profit to GDP ratio has moved from 0.46% to about 1.84%. So, almost 40% of the incremental increase in corporate profit to GDP ratio has come at the behest of BFSI. Those are the broad points I wanted to highlight from this report. What do you think is aiding corporate profitability? What are the factors at play and where could it head next if these factors continue to hold through from India Inc.? Gautam Duggad: Like I mentioned, during 2020-2025, cyclicals have made a huge contribution. The BFSI profits have crossed close to Rs 6 lakh crore right now. If you look at Nifty also, in FY18, the Nifty profitability in BFSI bottomed out somewhere close to Rs 45,000-48,000 crore. That number has reached Rs 3-3.5 lakh crore. So, that is the level of increase that we have seen. In FY25, if I look at the broader coverage universe, in the 65 financial companies that we track, we had a total profit pool of Rs 50,000 crore in FY18 and somewhere close to Rs 1,10,000, 1,15,000 crore in FY20. That number is now Rs 5 lakh crore. For context, this Rs 5 lakh crore was the total profit pool of all 300 companies that we used to track. You Might Also Like: Short covering anticipated next week; bullish on 4 pharma & defence stocks: CA Rudramurthy BV So, what was the profit pool of the 300 companies has now become the profit pool of just financials. So, they have made a huge contribution. Then, there are global commodities like metals, oil and gas. They have gone through their upcycle between 2020 and 2025. Then, there are a host of other sectors which have come and contributed. The capital goods sector, which was absent from 2012 to 2020, has made a huge comeback and we have seen how the stock prices have done. Going forward, we expect the nominal GDP to compound at 10% to 11%. We expect the earnings performance of corporate India will be in mid-teens. So, somewhere about 14-15% is what we are projecting between 2025 and 2027 and I would not be surprised if that magnitude of growth continues beyond 2027 to 2030 also. So, that is our expectations from a medium-term earnings point of view. We have come a long way from 2020 to 2025. What used to be a profit of just Rs 4 lakh crore for Nifty 500 companies has turned into Rs 16 lakh crore in 2025. Even if this were to compound at 14-15% over the next five years, there is a lot of wealth still to be created in the Indian equity market.
