Emkay Global in its latest strategy note said the domestic stock market could remain weak till March and that a stability is likely from April onwards, with earnings outlook improving and the FPI selling abating by then. Consumption should bounce back from the second half of 2025, it said. The brokerage suggested a 2025 Nifty target of 25,000, and sees small and midcap stocks outperforming ahead.
"We see another year of moderate (6.5 per cent) return in the Nifty, with our conservative target at 25,000: at a moderate valuation of 21.1 times trailing P/E, which is 5 per cent discount to the LTA. SMIDs, however, should deliver stronger returns as they should continue to outperform on fundamentals. We are at the last leg of the earnings downgrade cycle, and we see little more than a 2-3 oer cent risk to FY26 consensus Nifty EPS of Rs 1,251," Emkay said.
The broader markets may stay volatile in the March quarter, as uncertainties around earnings and geopolitics persist, Emkay said. The brokerage has gone contrarian on its sector picks, downgrading technology to 'neutral' on valuations and 'upgrading' consumer discretionary to 'overweight' on the expected turnaround. It added staples in its basket of structurally underperforming sectors. It is 'overweight' on healthcare and real estate.
"In large-cap, our picks are Lupin Ltd, Zomato Ltd, and Tata Motors Ltd. For midcaps, we recommend IndusInd Bank Ltd, Escorts Ltd, and One 97 Communications Ltd (Paytm). In smallcaps, our choices are StoveKraft, Metropolis Healthcare, and Quess Corp, reflecting strong growth potential and diversification opportunities," it said.
Largecap stock ideas
Lupin The 71 per cent 1-year stock performance has pushed valuations to 36 timres EPS (FY25), but the stock is set to deliver more than 40 per cent EPS till FY26. Moreover, consensus is trailing us on FY26 EPS by 17 per cent and Emkay expects the upgrade cycle to continue. ROEs are seen rising to 19 per cent for FY27, which should support the premium valuation sustainably.
Zomato
Emkay likes digital adoption as a long-term theme and said Zomato is one of the better ways to play this. The bbrokerage said Zomato is sitting on strong 1-year returns (113 per cent) but it sees continued long-term compounding. It sees a strong growth in both quick commerce and food delivery, and the valuation at 9 times EV/Rev (FY26) is not outrageous. Profitability is structurally improving as operating leverage kicks in, it said.
Tata Motors For Tata Motors, Emkay said JLR improvement continues along expected lines with the company on track for 1 billion British pound free cash low (FCF) this year along with a net-cash balance sheet. India commercial vehicle space is also seen recovering, albeit gradually, amid gradual public capex uptick, further accompanied by better profitability. India PV outlook is soft amid growth concerns and rising EV competition, it said.
"TTMT is the cheapest auto OEM (trades at 4.7 times FY27E EV/Ebitda and 1.8 times FY27 P/BV) despite strong balance sheet improvement over the past few years," it said.
Midcap stock ideas
IndusInd Bank The microfinance stress is in the price, even though the bank may need to make provisions for another 1-2 quarters, Emkay said. The other positives are overlooked, mainly the progress that is made in improving the deposit franchise. The stock is attractive at 1.2 times PBV (FY26) with a strong potential to rerate from a 1-year perspective. Improved system liquidity and any easing of lending regulations by the RBI would be strong catalysts, Emkay said.
Escorts The company is well-positioned for growth, with a potential tractor upcycle driven by an optimistic agricultural outlook. Product expansion, channel development, capacity enhancement, and increased sourcing from Kubota should bolster domestic and export growth.
"Escorts has corrected 24 per cent from the peak and trades at a 24 times core Sep-26E PE, compared with 27 times for M&M. This is supported by a 16 per cent EPS CAGR from FY25E-27E and strong over 30 per cent ROIC.
One 97 Communications Though Paytm has almost tripled from its lows, its EV/Revenue at 7.5 times (FY25) is well-supported by strong growth potential and a large addressable market.
Emkay sees the momentum across both payments and financial services, with a sharp improvement in profitability. Cash/market cap at 18 per cent is an additional comfort, it said.
Smallcap stock ideas
Stove Kraft
By leveraging cost leadership, advanced manufacturing, and strategic capex, the company is going to significantly outperform industry growth, Emkay said. This will be coupled with 290 bps Ebitda margin improvement to 12.5 per cent. An aggressive retail push — 25-30 new stores per quarter boosts visibility via its Pigeon brand. The PE of 47.5 times is supported by EPS of 36.6 per cent (FY24-FY27). ROEs are seen rising to 15 per cent by FY27.
Metropolis Healthcare This is a high-quality business with supernormal return ratios (more than 84 per cent CFO/Ebitda and growth in excess of 30 per cent). With the aggressive network expansion set to conclude by FY25, Emkay expects an improved margins and a stable 12-13 per cent revenue CAGR over the next 3 years. The expensive valuations (PE of 48 times on FY26) is supported by a large addressable market, easing up of competitive intensity and superlative cash flow generation (FCF/PAT over 130 per cent), it said.
Quess Corp
Emkay expects a revival in hiring in 2025, led by a turnaround in IT. Company has scaled its manufacturing segment to over 60k associates, making it the third-largest vertical. It expects 14.3 per cent revenue CAGR over FY24–27E, led by Foundit and steady contributions from other segments, with EBITDAM improving to 4.2 per cent by FY27E.
"The core business has healthy cash flow generation and over 18% ROEs, which support the PER of 18.4 times (FY26E)," it said.