Motilal Oswal Financial Services has reached a settlement with the Securities and Exchange Board of India (SEBI) regarding alleged lapses related to suspected front-running of trades involving a large client. The company has agreed to pay Rs 34.85 lakh in settlement expenses to resolve the matter.

Investigation Details

SEBI's investigation focused on whether trades of a significant client were front-run by the Chaturvedi Group during the period from January 1, 2022, to December 8, 2023. The regulatory body alleged that Motilal Oswal failed to maintain proper records of client order instructions and attempted to create supporting documents after trade execution.

Settlement Terms

The company opted for settlement without admitting or denying the findings presented by SEBI. According to Motilal Oswal, the matter involved one of its authorized partners, Om Securities. SEBI issued a show cause notice in February 2025, following which Motilal Oswal filed a revised application for settlement in March.

Resolution and Implications

With the approval of the settlement terms and the payment of Rs 34.85 lakh, the proceedings against Motilal Oswal Financial Services have been disposed of. However, it's important to note that SEBI retains the right to take action if the settlement terms are breached.

Company's Statement

Motilal Oswal Financial Services has stated that they chose to settle the matter without admitting or denying the allegations. This approach allows the company to resolve the issue while maintaining its position on the findings.

Regulatory Oversight

This case highlights the ongoing regulatory scrutiny in the financial services sector, particularly concerning issues of market integrity and client protection. SEBI's actions demonstrate its commitment to addressing potential misconduct and ensuring fair market practices.

The settlement of this case serves as a reminder to financial services firms of the importance of maintaining robust compliance systems and accurate record-keeping practices to meet regulatory requirements and protect client interests.

Motilal Oswal Financial Services has released its analysis of corporate earnings for the April-June quarter, describing them as modest but resilient. The brokerage firm's report highlights several key points about the current market scenario and future projections.

Q1 Earnings Overview

The aggregate earnings of companies in the Motilal Oswal Financial Services (MOFSL) Universe grew by 11% year-on-year, surpassing the estimated 9% rise. This performance marks the fifth consecutive quarter of single-digit net profit growth for the Nifty 50, which delivered an 8% growth against the estimated 5%.

Key Contributors to Earnings Growth

Five companies stood out as major contributors to the incremental earnings growth:

1. Bharti Airtel
2. Reliance Industries
3. State Bank of India (SBI)
4. HDFC Bank
5. ICICI Bank

These five companies collectively accounted for 77% of the incremental earnings growth in the Nifty 50.

Earnings Estimates and Market Performance

The brokerage's analysis revealed a balanced beat-miss ratio:

• 37% of companies exceeded profit estimates
• 36% of companies reported misses at the net profit level

Future Projections

Motilal Oswal projects a significant improvement in Nifty 50 EPS (Earnings Per Share) growth:

• FY25: 1% growth
• FY26: Expected to increase to around 9%

This projected increase is attributed to anticipated improvements in the macro environment, supported by fiscal and monetary measures.

Market Valuation

The Nifty 50 currently trades at 22.20x FY26E earnings, which is near its long-period average (LPA) of 20.70x.

Portfolio Strategy

Motilal Oswal's model portfolio maintains a strong large-cap bias:

The mid-cap allocation has been increased from 16% due to better earnings delivery in this segment.

Conclusion

While the April-June quarter earnings were modest, they demonstrated resilience and largely aligned with estimates. The projected increase in Nifty 50 EPS growth for FY26 suggests a positive outlook, supported by expected improvements in the macro environment. Investors may want to consider the balanced approach of Motilal Oswal's portfolio strategy, which maintains a significant large-cap presence while increasing exposure to mid-caps.