The Indian markets have seen elevated volatility and corrected for the third consecutive month. Given the current crisis across West Asia, the markets are in a state of turmoil, and the investors are confused. Domestic brokerage house Motilal Oswal, in its latest report, has shared its preferred list of stocks from the Nifty 50 index, along with select non-Nifty 50 companies.
Top Nifty 50 and Non-Nifty 50 ideas
According to the brokerage report, the top Nifty 50 ideas include Bharti Airtel, State Bank of India, ICICI Bank, Larsen & Toubro, Infosys, Mahindra & Mahindra, Titan, Bharat Electronics, Eternal, Tata Steel, and InterGlobe Aviation.
On the non-Nifty 50 side, the recommended names are TVS Motor Company, Groww, Indian Hotels, AU Small Finance Bank, Dixon Technologies, Suzlon Energy, Coforge, Radico Khaitan, Delhivery, and V-Mart Retail.
Motilal Oswal noted, “The third quarter of FY26 earnings have been in line with our expectations, with a beat-miss ratio for the Motilal Oswal Financial Services universe remaining balanced – 34% of the companies exceeded our estimates, while 32% reported a miss at the profit-after-tax level.”
Let’s take a look at the detailed investment rationale offered by the brokerage house. –
Earnings performance and macro outlook
The brokerage highlighted that the earnings season has shown a stable trajectory. “Clearly, with the heavy lifting by the Reserve Bank of India and Government of India through a series of stimulative monetary and fiscal measures, the macro environment for earnings has improved and is somewhat reflected in an impressive third quarter of Financial Year 2026 profit after tax growth of 16% year-on-year – mildly ahead of our estimates of 14%,” the report mentioned.
This suggests that Indian companies, particularly those in the Nifty 50, are slowly recovering from previous underperformance. Motilal Oswal expects about 12% earnings growth for the Nifty 50 over the period of FY25 to FY27 estimates.
Sector views and investment themes
According to the brokerage, the current market environment shows mixed signals. “We are overweight on Automobiles, Public Sector Undertaking Banks, Diversified Financials, Technology, Consumer Discretionary, and Capital Goods plus Electronics Manufacturing Services, which are our key preferred investment themes,” added the report.
Furthermore, the brokerage house remains neutral on Telecom, Cement, and Healthcare. It maintained an underweight stance on Private Banks, Consumer Staples, Oil & Gas, Utilities, and Metals within its model portfolio.
The report also noted the valuation trends. It added that two-thirds of the sectors now trade at a premium to their historical averages.
As per the brokerage house report, the Nifty 50 is currently at a 12-month forward price-to-earnings ratio of 20.2 times, slightly below its long-period average of 20.9 times. The report added that the price-to-book ratio at three times represents a 5% premium to its historical average of 2.9 times.
The report notes that some sectors, such as Capital Goods, Public Sector Undertaking Banks, Metals, and Utilities, continue to trade above their long-period averages.
Market volatility and performance
The brokerage pointed out that the markets have experienced heightened volatility in recent months.
“The Nifty 50 ended 0.6% lower month-on-month at 25,179 in February 2026 – the third consecutive month of a decline,” the report noted.
During the month, the index fluctuated by nearly 1,769 points before closing 142 points lower. So far in 2026, the Nifty 50 is down 3.6% year-to-date, while midcap and smallcap indices outperformed, rising 1.2% and 0.3% month-on-month, respectively.
Over a longer period, midcaps and smallcaps have clearly outperformed largecaps. Over the past five years, midcaps have grown at a compound annual growth rate of 20.5%, outperforming largecaps at 11.6% by 81%, while small caps at 16% have outpaced largecaps by 37%.
Conclusion
Motilal Oswal’s report highlights a cautious but structured approach to the Indian equity market. According to the brokerage house stated its preference stocks across selecet sectors including Auto, PSU banks, diversified financials, technology, consumer discretionary, and Capital Goods + EMS stocks.