Indian equities have delivered one of the strongest multi-year rallies globally, with the Nifty 50 climbing from around 8,400 in December 2014 to over 26,000 by September 2024, despite multiple corrections. According to Equirus Securities, this surge has been fueled by resilient domestic demand, aggressive policy support, and robust corporate earnings. Yet, with valuations well above historical averages, the brokerage stresses that sustaining momentum will hinge on consistent earnings delivery.
Market Trajectory and Valuations
Equirus noted that the index weathered the 2015–16 slowdown, the March 2020 COVID crash near 8,000, and the 2022 global tightening-led pullback. Post-pandemic, the rally was driven by fundamentals — India’s five-year EPS CAGR of ~18% is the highest globally, while ROE has averaged ~15%, second only to the US. However, valuations now exceed long-term bands, reflecting rich pricing for future growth.
Going ahead, the brokerage believes that near-term leadership is expected to shift toward largecaps and quality midcaps, while smallcaps face stretched valuations. Auto, Cement, NBFCs, and FMCG are among Equirus’ overweight calls, while sectors such as Building Materials, Industrials, and Defense remain underweight.
Smallcaps vs. Midcaps vs. Largecaps
Equirus flagged caution on smallcaps, pointing out that the Nifty Smallcap 100 trades at a significant premium to its 10-year +1 standard deviation, despite earnings cyclicality that makes them vulnerable in risk-off phases. Midcaps, though also trading above historical multiples, enjoy stronger earnings visibility thanks to sectoral tailwinds and balance sheet improvements. Largecaps, while not cheap, remain closer to their long-term bands and offer a better margin of safety.
Equirus highlighted that smallcap forward P/E stands at 1.25x vs. its long-term average of 0.88x, close to peak valuations, while Nifty 50 itself trades above its 10-year average. With CY25 EPS forecasts cut by 13.8% — the steepest since the pandemic — the brokerage advises a barbell approach: favoring largecaps for safety, selective midcaps for structural growth, and caution in smallcaps until earnings catch up.
Stock Picks by Equirus Securities
Equirus’ top 28 stock picks span across largecaps, midcaps, and smallcaps.
Largecap ideas: ABB India, BPCL, Cholamandalam Investment, Godrej Consumer, HDFC Bank, Infosys, JSPL, Ultratech Cement.
Mid- and small-cap ideas: AB Real Estate, Alkem Labs, Arvind Fashions, Avalon Tech, Berger Paints, Blue Star, Federal Bank, Gateway Distriparks, Grindwell Norton, Hero MotoCorp, IGL, JK Lakshmi Cement, Jyothy Labs, Lumax Industries, Marico, PI Industries, PNC Infratech, Polycab India, Prudent Corporate, Ujjivan Small Finance Bank.
According to Equirus, these companies combine sectoral tailwinds, strong balance sheets, and earnings visibility, making them attractive in a market where valuation discipline is critical.
Earnings Revisions Signal Caution
Equirus further emphasized that Nifty earnings downgrades remain a recurring theme. Over the past decade, EPS estimates have almost always ended lower than initial projections, with cuts ranging from ~2% to ~37%. For CY25, downgrades already stand at -13.8% (from 1,289.7 to 1,111.6), the steepest since the pandemic. CY24 saw a relatively moderate 4% cut, though late-year downgrades emerged across global cyclicals and domestic consumption.
The brokerage pointed out that deep early cuts, such as those for CY25, often signal cautious assumptions for the following fiscal year. Unless a strong macro or earnings surprise emerges, recovery remains uncertain.
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 making any investment decisions.
