Expert view: Nifty 50 could deliver 16% earnings growth in FY25, and largecap 100 too, says Roop Bhootra of Anand Rathi

Looking ahead, the report said that Nifty50 is expected to deliver 16% earnings growth in 2024-25 and Nifty large cap 100 is expected to register similar earnings growth.

Nobody really factors it in, and when the correction finally happens, everyone asks the same questions that they should not be asking if they had invested in small caps. There are some things that are in our hands, and some that are not.

“2023 was one such year where earnings understripped markets, so markets say for the small and midcap names, markets were up somewhere in the region of 35% to 40%. I do not think earnings grew by that much. Earnings would have grown in the range of say 20 odd percent. Now what that means is that markets have outstripped earnings for that one year.”

The Nifty is expected to rise towards 18,500 in May, following April's gains of over 3% driven by sustained foreign investor inflows and strong earnings from banking majors in the latter half of the month. While Indian equity markets continue to lag other global peers, data shows that investing in May has produced double-digit return averages 83% of the time. Analysts expect foreign portfolio investors to continue as net buyers, despite net selling YTD of INR 14,158 crore ($1.9bn). However, the biggest risk to current uptrends is further earnings downgrades.

Saion Mukherjee says: “As we see traction in manufacturing, our expectation is that we will also see a very strong pickup in private capex. So manufacturing, private capex, exports, would be the drivers of corporate earnings over the medium term. Of course, this would have a ruboff effect on consumption as we go forward.”

On Monday, bulls kept up the momentum amid thin volumes to drive the Nifty to a new high, led by ICICI Bank, Reliance Industries, Bharti Airtel, ITC, and Bajaj Finance.

Even as nifty corrects, more small cap stocks are joining the party and on a number of days the breadth of the small cap segment is better than large caps. Coming on the list is auto ancillary unit to logistic company. ET screener powered by Refinitiv’s Stock Report Plus applies different algorithms & filters to all BSE and NSE stocks, and lists stocks which fulfill the various criteria as specified into the algorithms & filters to find those which might help navigate the stock market.

Mr Shah speaks about the sectors that are likely to perform in the next financial year, explains reasons for reading financial statements before investing. He also asserts that mid cap stocks tend to outperform small cap & large caps in the long run.

As the nifty continues to move upward, more small caps stocks are joining the party. Even on days when select stocks are bringing nifty under pressure, breadth of small cap seems to be holding out. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks from small cap space with high upside potential over the next 12 months, having an average recommendation rating of “Buy” or Strong Buy and also meeting parameters like net margins and return on equity.

Aequitas Investments, a small and mid-cap investor, is still finding companies in the small and midcap sector with inexpensive valuations and continues to invest in them. While there is froth in the small and mid-cap space, there are still pockets with attractive valuations. Aequitas Investment's small-cap strategy has been the top performer in September, driven by long-term calls in sectors such as infrastructure and manufacturing. Thematic funds focused on India's growth story are expected to do well, but it is important to enter at the right stage