Stock Market Strategy: Nifty 50 Gains Likely to Mirror Earnings Growth; Prefer Large Banks, IT, Capital Goods: HDFC sec

India’s Corporate Earnings Outlook appears promising, supported by robust government capital experience and a revival in consumption with-inflation and eventing interesting.

In the March 2025 Quarter, Midcap and Smallcap Companies Posted 12% Year-On-Year (Yoy) Earnings Growth, Outperforming The Large-Cap Segment, which grew at 5.5% yoy.

Sector-Wise, Power, Metals, Pharmaceuticals, Cement, Real Estate, and Industrials Delivered Double-Digit Yoy Earnings Growth in Q4 FY25. In contrast, earnings declined in financial sector like lenders and capital markets, as well as in consumer staples, consumer discretionary, and energy, accounting to HDFC SECURITIES.

Remarkably, A Significant Port of the Incremental Earnings Growth was Driven by Just Five Companies: Indian Oil Corporation, NTPC, ICICI Bank, Bharti Airtel, and Hindalco Industries. Meanwhile, ONGC, SBI, and Indusind Bank Were Among the biggest drags on aggregate earrings.

The nifty 50 index is currently trading at approximately 21.0 times fy26 earnings (vs. the 10-year average of 20.4x) and 18.5 times fY27 earnings (vs. the 10-year Average of 17.3X) Estimates. Given the recent rally in the nifty 50 index, further Valuation Re-Rating Appears Limited, and Future Returns are expected to align Closely with Earnings Growth, HDFC SECURITES NOTED.

Sector and Stock Strategy

HDFC Securities MainTains A Positive Stance on Large Private-Sector Banks, Information Technology (IT), Consumer Discreationary, Real Estate, Cement, and Capital Goods. It remains underweight on oil & gas, mid-cap it, small banks, and non-banking financial companies (NBFCs).

Focus on Bottom-up Stock Picking

The brokerage emphasizes that with limited scope for broad-based sectorral re-rating, outperformance is likely to be driven by Companies with Strong Earnings Visibility. As a result, stock-specific, bottom-up ideas will play a more crucial role than macro or sector-based strategies.

Model portfolio changes

The stocks that were added or saw increase weightage in HDFC Securities Fluorine.

The stocks that was excluded or saw reduced weightage in the model portfolio was Indusind Bank, Wipro, Bharat Petroleum Corporation Ltd (BPCL), Maharanagar Gas Ltd, Hindalco Industriies, Sun Pharmaceutical Industries, Dalmia Bharat, Dabur India.

Disclaimer: The views and recommendations made about individual analysts or broking companies, and not of Mint. We Advise Investors to Check With Certified Experts Before Making Any Investments Decisions.