Brokerage firm Kotak Institutional Equities has revised its recommended model portfolios after a sharp recovery in select sectors and broader markets over the past one to three months. According to the brokerage's note dated July 13, "The strong rebound in several sectors, mid- and small-cap. stocks in the past 1-3 months has forced us to rejig our recommended portfolios, much faster than our liking. The opportunity set has narrowed, but macro and earnings outlooks have likely improved." The revision reflects what Kotak describes as "selective churn" in their stock picks as the market rally has created new challenges in portfolio construction. As per The Financial Express, the brokerage has added SBI Life Insurance and Tata Consultancy Services to its large cap portfolio and increased its weight on Larsen & Toubro, while moving ICICI Prudential Life Insurance from the large-cap portfolio. The latest developments show Kotak has also increased the weight on Larsen & Toubro (L&T) by 100 basis points to 400 basis points as part of the portfolio rebalancing strategy.
Brokerage firm Kotak Institutional Equities has included Tata Consultancy Services (TCS) in its model portfolio with a 150 basis points weightage, despite the IT giant's challenging performance. According to The Financial Express, TCS offers an 18% potential upside to Kotak's 12-month fair value of ₹2,450, with the stock trading at 13x one-year forward EPS. Kotak's note stated that the inclusion of TCS merely reflects their discomfort with the large 'underweight' on the IT sector and 'inexpensive valuations.' The brokerage clarified that "The inclusion of TCS does not indicate any sort of endorsement of the IT services sector. It merely reflects our discomfort with (1) our large underweight on the sector and (2) 'inexpensive' valuations (at least on paper) of large-cap. IT services stocks post the severe underperformance of the sector." TCS shares have declined 4% over the past month, 18% over three months, 35% over six months and 38% over the past year, making the valuation more relevant to Kotak's portfolio decision. The latest report from Livemint confirms that "IT services stocks post the severe underperformance of the sector. We have limited insights into the duration and magnitude of potential AI-led deflation in prices and the extent of related margin pressures. We have been quite underweight on the IT services sector for a while."
Besides TCS, Kotak Institutional Equities has included SBI Life with a weightage of another 150 basis points, while the weightage of Larsen & Toubro has been increased by 100 basis points to 400 basis points. As reported by The Financial Express, SBI Life offers the highest potential upside at around 35%, followed by DCB Bank at about 20%, TCS at 18% and CRISIL at about 15% based on Kotak's 12-month fair values. On SBI Life, the brokerage noted that "SBI Life trades at 1.6X FY2028E EV and offers around 35% potential upside to our 12-month FV of ₹2,500." To balance these recent inclusions, Kotak has moved its 160 basis points investment in ICICI Prudential Life to the Midcap Portfolio and removed Mankind Pharma, which had a weight of 140 basis points. The addition comes as Kotak sees banking, financial services and insurance stocks trading at relatively more attractive valuations than consumption and investment-linked sectors.
The brokerage has revised its recommended mid-cap portfolio by including CRISIL, DCB Bank and ICICI Prudential Life, while removing Dixon Technologies, Delhivery and Info Edge. According to The Financial Express, to balance these inclusions, Dixon Technologies, Dr. Lal Pathlabs and Info Edge have been removed, courtesy of their recent strong performance over the last one to three months, resulting in limited upside potential. The latest report from Livemint confirms that "In its recommended mid-cap portfolio, Kotak added CRISIL, DCB Bank, and ICICI Prudential Life Insurance Company, while removing Dixon Technologies (India), Dr. Lal PathLabs, and Info Edge (India)." The brokerage noted that "DIXON stock is up 17% and 26% in the past one and three months, DLPL is up 8% and 21% in the past one and three months and INFOE stock is up 24% and 22% in the past one and three months."
While ICICI Prudential is the only largecap to midcap move, Kotak Institutional Equities has also included CRISIL and DCB Bank in the list. According to The Financial Express, Kotak expects Nifty 50 earnings to grow 17.6% in financial year 2027 and 14.1% in financial year 2028. The brokerage has clarified that this move does not indicate any sort of endorsement for the Indian IT sector and that they continue to remain 'underweight' as they have been since a long time. On CRISIL, Kotak said "CRISIL stock has fallen 31% in the past 12 months on concerns around the growth prospects of its research, analytics and solutions (RAS) business, which could be at risk from disruption from AI. Nonetheless, it has an extremely solid ratings business." On DCB Bank, the brokerage noted that "DCBB trades at 0.9X FY2027E BV and 0.8X FY2028E BV and will generate about 13-14% RoE in FY2027-28E." The latest report from Livemint highlights that "The Indian stock market continues to see wide variance in valuations, with consumption and investment stocks trading at fair-to-rich valuations and BFSI and IT services trading at cheap-to-attractive valuations, resulting in reasonable valuations for the Nifty 50 index."
