'From event to earnings': Motilal Oswal Private Wealth shares views on stock market

Motilal Oswal Private Wealth (MOPW) in its May 2025 Alpha Strategist Report said the Indian stock market is entering a phase where investor focus should shift "From Events to Earnings". This transition comes as much of the event-driven volatility is believed to be behind us or already priced in. Early Q4 results indicate an improvement in corporate performance, and a 14% compound annual growth rate (CAGR) in Nifty EPS is projected over the next two years, the report suggested. Large-cap valuations have moved from attractive to fair, necessitating moderated return expectations. Meanwhile, mid- and small-cap stocks continue to trade at a premium, although selective opportunities are emerging in these segments, 

The report outlines that Indian markets are relatively well-positioned to capitalise on stabilising domestic factors. Indicators such as a falling 10-year yield, a stable rupee, and contained inflation support a constructive market outlook. Despite concerns of an economic slowdown, positive elements like record-high GST collections in April, up 12.6% year-on-year, and robust export data suggest a potential uptick in economic activity.

Renewed foreign investor confidence is evident with FII flows turning net positive for two consecutive months. This reflects an optimistic sentiment, even amidst ongoing geopolitical tensions such as India–Pakistan issues, which may cause short-term volatility but are unlikely to unsettle the overall market stability.

For equity investments, MOPW advises a lump sum approach in Hybrid, Large Cap, and Flexi Cap funds. For Mid and Small Cap strategies, a staggered investment approach over the next two to three months is recommended, with any market pullback viewed as an opportunity for more aggressive deployment. In fixed income, the Reserve Bank of India's supportive stance towards the economy is facilitated by a benign inflation trend.

MOPW highlights the importance of long-term investing. A study tracking the Nifty 50 Index and two actively managed funds over 29 years revealed interesting patterns of equity market behaviour. Notably, around 66.67% of the time, one-year absolute returns were positive, illustrating the nonlinear nature of equity returns.

Active fund managers, despite poor initial returns, managed to achieve positive annualised returns over five years and double-digit returns over ten years. Such findings underscore the significant impact of compounding on investment returns, often more than realised by many investors.

The report underscores that bear markets are temporary setbacks within a predominantly upward trend, despite being hard to perceive during downturns. Historical data, such as the 52% fall in the Nifty 50 Index in 2008 followed by a 71% recovery in 2009, exemplifies this perspective, suggesting that investors should remain resilient during market corrections.

In conclusion, global concerns have eased, allowing Indian markets to focus on improving domestic factors. With stabilising yields, a stronger rupee, lower inflation, and crude prices, coupled with a positive earnings outlook, the stage is set for a potential market rebound. Investors are encouraged to balance their strategies with careful allocation, making use of both lump sum and staggered investment approaches as appropriate.