India witnessing a mini-Goldilocks moment, says Motilal Oswal, lists ICICI Bank, SBI, ITC among 21 top picks

Despite the Indian stock market's valuation inching higher to premium levels, its stability and attractive prospects for the medium to long term remain intact. This is due to a confluence of factors, including robust macroeconomic conditions, consistent policy momentum, stable interest rates, and a gradual easing of inflation.

According to brokerage firm Motilal Oswal Financial Services, "India is witnessing a mini-Goldilocks moment, thanks to solid macroeconomic conditions, healthy corporate earnings, peaking interest rates, moderate inflation print, and ongoing policy momentum."

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The brokerage firm pointed out that the Nifty 50 trades at a 12-month forward P/E (price-to-earnings) ratio of 19.2 times, near its long-period average (LPA) of 20.3 times, at a 5 per cent discount. The 12-month trailing P/E for the Nifty 50, at 21.9 times, is near its LPA of 22.4 times, at a 2 per cent discount.

On the other hand, Nifty's 12-month forward P/B (price-to-book) ratio of 3.1 times represents a 12 per cent premium to its historical average of 2.8 times, while at 3.5 times, the 12-month trailing P/B ratio for the Nifty is above its historical average of 3.1 times, or at a 16 per cent premium, Motilal Oswal pointed out.

The Nifty is trading at a 12-month forward RoE (return on equity) of 16.3 per cent, above its long-term average, said the brokerage firm.

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Motilal pointed out that India’s market capitalisation-to-GDP ratio has been volatile, plummeting to 56 per cent of FY20 GDP in Mar’20 from 80 per cent in FY19 and then sharply reviving to 112 per cent in FY22.

"The market capitalisation-to-GDP ratio moderated to 96 per cent in FY23. It is now at 132 per cent (of FY24 GDP of 9.6 per cent YoY), above its long-term average of 85 per cent," said Motilal Oswal.

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Talking about its model portfolio, Motilal said it is aligned with the key domestic cyclical themes.

"We remain overweight on financials, consumption, industrials, and real estate. Industrials, consumer discretionary, real estate, and PSU banks are our key preferred investment themes," said Motilal Oswal.

Top picks

ICICI Bank, SBI, ITC, Larsen and Toubro, HCL Tech, Mahindra and Mahindra, Coal India, Titan, ABB, Zomato, and Hindalco are Motilal's top picks from the largecap space.

On the other hand, Indian Hotels, Godrej Properties, KEI Industries, Global Health, JK Cements, PNB Housing, Cello World, Sobha, Kirloskar Oil, and Lemon Tree Hotel are the top picks from the mid and smallcap segments.

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