India Inc prepares for a cautious 2025: BFSI, healthcare shine while auto, real estate struggle; MOSL list top picks

India’s corporate sector is preparing for a cautious yet strategic 2025, as macroeconomic headwinds, slowing earnings growth, and global risks weigh on market sentiment. According to Motilal Oswal Financial Services (MOSL), while the country’s economic fundamentals remain strong, sectors are witnessing a clear divergence in performance. BFSI, healthcare, and capital goods are showing resilience, while autos, real estate, and consumer discretionary are facing headwinds.

According to domestic brokerage house Motilal Oswal (MOSL), the latest edition of Strategy Voices highlights corporate perspectives on economic trends, sectoral shifts, and market positioning strategies for the upcoming year.

Corporate Caution Prevails Amid Macroeconomic Headwinds

As per MOSL, Indian businesses are entering 2025 with a cautious stance, balancing growth aspirations with economic realities. Public investments and domestic consumption continue to support expansion, but a global slowdown, supply chain disruptions, and inflationary pressures remain significant concerns.

Major Insights

Earnings Slowdown and Market Pressures

MOSL reported that corporate profitability is under strain, with Nifty-50’s FY25 earnings growth projected at just 5 percent year-on-year (YoY), a sharp drop from the 20 percent-plus compound annual growth rate (CAGR) recorded between FY20-24. This decline is attributed to inflationary pressures, high interest rates, and subdued consumer spending, all of which have weakened earnings momentum.

Sectoral Divergence – Winners and Laggards

According to MOSL, a sectoral divide is becoming more apparent. BFSI, healthcare, and capital goods continue to show resilience, supported by strong domestic demand and policy measures. In contrast, automobiles, real estate, and consumer discretionary are grappling with muted demand, cost inflation, and margin pressures, limiting their near-term growth prospects.

Export-Driven Sectors Face Headwinds

Industries reliant on exports, such as IT services, chemicals, and automobile exports, are struggling due to slower global economic growth, supply chain challenges, and pricing pressures. As per MOSL, the IT sector, traditionally a growth engine, is seeing weaker deal momentum and cautious client spending. Meanwhile, chemical exports are facing stress from lower global commodity prices and subdued international demand.

Capex Cycle Offers Long-Term Growth Potential

Despite these challenges, India’s capital expenditure (capex) cycle remains a bright spot, providing long-term growth opportunities. According to MOSL, sectors such as railways, defence, and renewable energy are seeing steady investments, driven by government initiatives and private sector participation. These infrastructure-led sectors are expected to act as economic stabilizers, offsetting demand slowdowns in other industries while supporting sustained expansion.

Sectoral Shifts: Strength in Some, Stress in Others

The business landscape is witnessing distinct sectoral trends, with some industries leveraging structural tailwinds while others struggle with demand contraction and cost pressures. BFSI, pharmaceuticals, and capital goods are maintaining positive momentum, while automobiles, metals, and consumer discretionary sectors remain under pressure, noted the brokerage.

BFSI – MOSL stated that the banking and financial services (BFSI) sector continues to witness stable loan growth, but net interest margin (NIM) compression and asset quality concerns remain key challenges. Non-banking financial companies (NBFCs) are facing rising funding costs, impacting profitability. However, gold loans remain a bright spot, driven by strong rural demand and increasing gold prices.

Healthcare – The healthcare sector is experiencing steady domestic demand, particularly in chronic therapies, which are driving revenue growth. MOSL noted that US generics are under pressure due to pricing erosion and intense competition. The biopharma manufacturing segment is gaining traction, with companies focusing on contract development and manufacturing (CDMO) and biosimilars for long-term expansion.

Infrastructure & Capital Goods – According to MOSL, infrastructure and capital goods remain key beneficiaries of public capex, particularly in defence, railways, and renewable energy. The sector is witnessing healthy order inflows, and private sector capex is expected to accelerate by Q4FY25, driven by production-linked incentive (PLI) schemes, industrial automation, and strong domestic demand.

Automobiles – The automobile sector is experiencing weaker demand in passenger vehicles and two-wheelers, even as electric vehicle (EV) adoption picks up. Export markets remain sluggish, MOSL reported, with weak demand in Europe and the US impacting original equipment manufacturers’ (OEM) production and sales outlooks.

Consumer & Retail – The consumer and retail sector is facing muted urban demand, while rural spending is showing early signs of recovery. However, high input costs and weak consumer sentiment continue to put pressure on growth, leading retailers to adopt a cautious expansion strategy for the near term, as per MOSL.

Investment Strategy for 2025: Balancing Valuations, Growth, and Market Risks

With earnings growth slowing to 5 percent YoY in FY25 from over 20 percent CAGR between FY20-24, a stock-specific and sector-focused approach is key. According to MOSL, high valuations, global risks, and muted corporate profitability require investors to prioritize sectors with strong earnings visibility and sustainable demand drivers.

Sector Allocation Strategy

Overweight Sectors – Consumption, BFSI, IT, Industrials, Healthcare, Real Estate

Underweight Sectors – Oil & Gas, Cement, Automobiles, Metals

ICICI Bank, SBI – Strong loan growth and asset quality.

Bharti Airtel – Benefiting from 5G adoption and ARPU growth.

L&T – Riding on infrastructure expansion and a strong order book.

Sun Pharma – Specialty drugs and chronic therapy demand driving growth.

Maruti Suzuki, Titan, Trent – Leveraging domestic consumption trends.

Indian Hotels – Benefiting from travel and tourism recovery.

Dixon Tech – PLI-driven electronics manufacturing growth.

Godrej Properties – Riding on urban housing demand surge.

Coforge – Positioned for digital transformation and cloud adoption.

Page Industries – Strong demand for premium apparel and athleisure.

Overall, as India enters 2025, the corporate sector faces a delicate balance between growth and macroeconomic challenges. According to MOSL, while certain sectors like BFSI, healthcare, and capital goods are well-positioned for stability, others, such as automobiles, real estate, and discretionary consumption, continue to face demand pressures. The investment landscape requires a disciplined approach, focusing on high-quality large caps and select midcaps to navigate market risks effectively.

With valuations elevated and global uncertainties persisting, MOSL suggests that investors adopt a sector-focused strategy to ensure long-term portfolio resilience.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.