Motilal Oswal: FY26 cuts ease, MOFSL shares surge

Indian equities: brokerage flags a possible turn

Motilal Oswal Financial Services (MOFSL) said Indian equities may be turning a corner after months of estimate downgrades, arguing the worst of earnings cuts is likely behind. The brokerage pointed to the mix of a better earnings cycle, decent valuations, and a base of underperformance as factors that could support an up-move in market levels and valuation expansion. It added that the easing trend has been uneven, signalling that the recovery is not uniform across sectors. The view comes at a time when investor focus is split between macro stability, foreign investor sentiment, and sector-specific catalysts. Motilal Oswal also linked market direction to policy support, arguing that a stimulative fiscal and monetary mix can influence sentiment and corporate earnings momentum.

FY26 estimate cuts: what the brokerage highlighted

A key data point in the note was the extent of revisions already taken in forward estimates. Motilal Oswal said FY26 PAT estimates for its coverage universe and the Nifty had been cut by about 13% and 16% respectively since 1QFY25. The brokerage interpreted this as evidence that a material part of the downward revision cycle may be behind the market. It also suggested that the next leg would depend on whether earnings delivery improves, rather than on further multiple expansion alone. While the report did not claim a straight-line recovery, it framed the market set-up as improving compared with the prior period of repeated downgrades.

Policy backdrop: rate cuts, liquidity, and tax measures

Motilal Oswal attributed part of its optimism to a supportive policy environment. It said the RBI has lowered the repo rate by 100 basis points to 5.5% and is set to reduce the cash reserve ratio (CRR) to 3% in stages. The brokerage described policymakers as being in a “whatever-it-takes” mode, citing steps that pushed liquidity into surplus. It also referenced cuts in GST rates and reductions in personal income taxes to lift disposable incomes.

On consumption, the report said “GST2.0” has the potential to kickstart a consumption cycle and could be an earnings kicker for India Inc. It added that lower prices can spur demand and may support margin expansion through operating leverage. Separately, the broader macro commentary in the material also referenced INR 1 trillion (INR 100,000 crore) of personal tax foregone in the FY26 Union Budget, alongside state-level income transfer schemes, as potential supports for disposable income.

Earnings revival signals: banks and consumption in focus

On the market’s earnings mix, the commentary pointed to early signs of an earnings revival led by banks and consumption-linked sectors. It linked this to improving credit growth and stable inflation. In the transcript-style excerpt, nominal GDP growth of about 10% to 11% was cited as a requirement for 15% growth, alongside an expectation that this would support tax collection. Credit growth was cited as being around the mid-teens, with the discussion referencing a 14% to 16% zone.

Inflation conditions were also described as improving, with CPI at 3.6% in Feb’25, and forecasts referenced for FY25 CPI at 4.7% year-on-year (vs 5.1% earlier) and a benign 3.8% CPI for FY26. The overall thrust was that easing inflation and supportive liquidity conditions can help both consumption and credit-led parts of the earnings cycle.

MOFSL stock rally and operating performance highlights

MOFSL itself has been a major talking point in the material, with its stock price rising 109% in just under three months. The move was described as a 238% year-to-date increase, compared with a 12.5% rise in the BSE Sensex. The company’s market capitalisation was stated to have crossed INR 62,000 crore.

The company’s Q2FY25 result highlights in the material included operating revenue growth of 46% year-on-year, margins improving to 64%, and total PAT growing 123% year-on-year. ROE was stated to have improved to 48%. The note also mentioned that market share improved in SIP and net mutual fund sales.

Market share gains: broking, wealth, and lending

Motilal Oswal’s commentary tied MOFSL’s operating momentum to share gains and business mix changes across segments. It said EBITDA excluding treasury income increased from INR 260 crore in Q1FY23 to INR 480 crore in Q1FY25, and also referenced the same series in another format as INR 260 crore (Q1FY23), INR 340 crore (Q1FY24), and INR 480 crore (Q1FY25). The brokerage also cited:

• 320 bps and 250 bps year-on-year improvement in cash and option market share
• 36% year-on-year increase in the broking lending book
• 37.2% year-on-year increase in wealth management relationship manager count
• 21 bps increase in equity market share and 20 bps rise in SIP market share in the AMC business over the last two years
• 9.3% increase in the housing finance (HFC) loan book with a 20 bps improvement in RoA over the last two years (FY22-FY24)

It also described MOFSL’s strategic evolution from traditional stockbroking to wealth management, aligning the shift with changing client preferences for advice-led offerings.

Regulatory changes in derivatives and tighter risk frameworks

The material also referenced the impact of regulatory changes in the derivatives segment, the outlook for a recovery in broking, and how margin funding risks are being managed under a tighter risk framework. While detailed rule changes were not enumerated in the text provided, the framing suggests that risk management and funding discipline are central to how intermediaries protect profitability during regulatory transitions.

Technical levels and brokerage valuation reference points

A technical commentary included in the material said the stock closed around 822, exceeding the price range of the past couple of months, and cited a bullish breakout supported by Bollinger Bands and strong volumes. The same note said RSI indicators across daily, weekly, and monthly time frames were in positive territory. It suggested an expected upside range of INR 1,100 to INR 1,285, with downside support levels at INR 840 to INR 820. Separately, the material also referenced a BUY view with a revised target price of INR 703 (earlier INR 395, adjusted for a 1:4 bonus), using FY26E sum-of-the-parts (SoTP) valuation assumptions and segment multiples.

Shares of Motilal Oswal were also stated to be trading 6.4% higher at INR 990.25 on the BSE around 2 PM on the day referenced.

Defence picks and global sentiment risks

Beyond financials, Motilal Oswal highlighted Hindustan Aeronautics and Bharat Dynamics as top picks, citing rising geopolitical tensions, robust government budgets, and supportive defence policies. On broader market risk, the note flagged that Indian markets could remain hostage to volatile sentiments toward Indian equities, particularly from foreign investors. It said signs of thaw or easing in Indo-US engagement could act as a sentiment booster, and also referenced that any resolution of a tariff stalemate could be an external catalyst.

Key numbers at a glance

Conclusion

Motilal Oswal’s central message is that the earnings downgrade cycle appears to have progressed significantly, with policy easing and liquidity support improving the backdrop for banks and consumption-linked sectors. For MOFSL, the material links the stock’s sharp rise to operating momentum, margin improvement, and market share gains across broking, lending, wealth, and asset management. Near-term market direction, according to the note, still depends on foreign investor sentiment and external triggers such as Indo-US engagement and tariff-related developments. The next set of datapoints investors are likely to track are follow-through in earnings delivery and the on-ground impact of policy actions on consumption and credit trends.