Motilal Oswal, Jeffries, Goldman Sachs: 2025 sector overweights

This year has been qutie good for investors. The sector outperformers of 2023 continued their rally in 2024 as well. The top five sector performers of 2024 were realty, healthcare, pharma, consumer durables, and auto.

Among these, the realty, auto, and pharma sectors were repeat top performers from 2023. These sectors performed well despite uncertainty and volatility from elections in India and the US, escalating geopolitical tensions, and foreign institutional investor outflows due to interest rate cuts by the US Federal Reserve.

As we head into 2025, analysts have mixed opinions on sector performers. Most analysts expect the market to consolidate in the first half due to moderate earnings and high valuation. However, they expect a recovery in the second half. A market correction is buyer nirvana as investors get to pick some good stocks at great prices. 

Taking a top-down approach, analysts listed some sectors as ‘overweight’ and some as ‘underweight’. Profit Pulse has identified sector overlaps by looking at the 2025 macroeconomic outlook of three brokers—Motilal Oswal, Jeffries, and Goldman Sachs.

Here are some interesting findings.

All three brokers are ‘overweight’ on two sectors and have opposite views on two.

Also read | Top 10 stocks to add to your watchlist for 2025

Two overweight sectors

All three brokers are ‘overweight’ on the real estate and information technology (IT) sectors. Interestingly, the real estate sector has been on a growth trend over the last two years while the IT sector saw a slow recovery after consolidation.

Real estate

India’s real estate sector has been a star performer the last two years, with the Nifty Realty index surging 82% in 2023 and 36% in 2024. Some of the best performers of 2024 are Raymond Ltd, Sobha Ltd, and Oberoi Realty Ltd, giving an annual return of over 60%. Analysts expect the demand momentum for realty stocks to continue in 2025.  

Of the 10 stocks listed on the Nifty Realty index, Macrotech Developers Ltd reported the fastest sales growth of 48% in the last 12 months. Motilal Oswal and Jefferies have added Macrotech to their 2025 stock picks. Motilal Oswal is bullish on Macrotech’s presence in luxury real estate and has set a target share price of ₹1,770, reflecting a potential upside of 25% from the stock’s 27 December share price of ₹1,441.

Goldman Sachs is also ‘overweight’ on real estate. However, it has not added any real estate stocks to its 2025 top picks as its strategy is focused on stocks that have corrected 20% or more.

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Information technology

The Nifty IT index saw a slow and steady recovery of 26% in 2023 and 23.9% in 2024 after a 25% consolidation in 2022 due to weak demand from the US and Europe. The three brokers are ‘overweight’ on the IT sector because they expect demand to recover as the Fed cuts interest rates further next year and the US economy shows resilience.

While US president-elect Donald Trump’s pro-business policies and potential cuts in corporate tax could drive demand for IT services, stricter immigration policies could increase costs for Indian tech services companies. Nevertheless, analysts are bullish about the domestic IT sector’s recovery.

Goldman Sachs is ‘overweight’ on CE Info Systems Ltd, Jefferies on Infosys Ltd, Tata Consultancy Services Ltd, and Coforge Ltd, and Motilal Oswal on HCL Technologies Ltd. Motilal Oswal has revised its FY25 growth forecast for HCLTech to 3.5-5% to account for strong deal wins and leadership in next-gen platforms. It has a target price of ₹2,300 for HCLTech, representing a 21.6% potential upside.  

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Mixed outlook on two sectors 

While the three brokers are bullish on real estate and IT, they are divided on auto and consumer durables.

Automobile       

The Nifty Auto index surged 47.6% in 2023 and 26.7% in 2024, outperforming the Nifty 50, which has gained about 10% so far in 2024. The Nifty Auto index surged as much as 50% in the first nine months and corrected 16% in the last quarter of 2024. The top performers of 2024 are Mahindra & Mahindra Ltd and Samvardhana Motherson International Ltd, which have given an annual return of 75.8% and 60.8%, respectively.

Goldman Sachs remains ‘overweight’ on the auto sector as it expects SUV premiumisation to continue, electric 2-wheeler demand to recover, and exports to pick up. Jefferies is ‘overweight’ on Eicher Motors Ltd, Mahindra & Mahindra, and TVS Motors Ltd in the auto sector.

However, Motilal Oswal is ‘underweight’ on the auto sector as it expects growth to moderate after three years of accelerated growth. Mahindra & Mahindra’s last 12-month revenue growth of 11% is slower than its 3-year revenue compound annual growth rate (CAGR) of 23.25%.

Given that the automotive sector is cyclical, it remains to be seen if the sector is nearing the end of its cyclical growth or if more growth is ahead.

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Consumer durables

The scenario is different for the consumer durables or consumer discretionary sector (excluding auto). The Nifty Consumer Durables index was the fourth best-performing sector of 2024, giving a 35% return, almost in line with its 33% return in 2023. Dixon Technologies (India) Ltd, Amber Enterprises India Ltd, Blue Star, and Kalyan Jewellers India Ltd were among the top performers, giving more than 100% return in a year.  

Goldman Sachs is bullish on consumer durables, expecting the booming middle class to invest in premium products. It has added Kajaria Ceramics Ltd, Crompton Greaves, and Havells India Ltd to its 2025 top picks.

Motilal Oswal is bullish on the consumer discretionary sector due to rapid shifts in consumer purchasing behaviour, with a transition from unorganized to organized retail channels. It has added Zomato Ltd to its 2025 stock picks with a target price of ₹330, representing a potential upside of over 20% from the stock’s 27 December share price of ₹271.45.

However, Jefferies is ‘underweight’ on the consumer discretionary sector as it expects a slowdown in India’s economy in the first half of 2025. 

Such contrasting recommendations on a sector require caution. A good strategy would be to add the index to the watchlist until there is clarity. You could also do your research and pick stocks with reasonable valuations and earnings growth potential.   

Also read | India’s railway and road expansion boom: 3 stocks to watch

In summary

The Union Budget for 2025-26, Trump’s trade policies, and interest rate cuts by the US Fed and the Reserve Bank of India could result in a cyclical shift in the stock markets, with the bullish sectors showing signs of a slowdown and new sector performers taking the stage.

While IT and real estate show strong earnings potential, a few analysts are ‘overweight’ on healthcare and the banking, financial services, and insurance (BFSI) sectors. In automotive and consumer durables, you might have to trade with caution.

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. 

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Puja Tayal is a seasoned financial writer with over 17 years of experience in fundamental research. She brings a good blend of comprehensive, well-researched insights into a company’s work in her articles.

Disclosure: The writer does not hold the stocks discussed in this article but some of her relatives do.