With four phases of elections concluding and just three weeks left for election outcome, investors seeking to hedge their stock portfolios amid heightening volatility could look at particular sectors, whose fortunes would be indifferent to the result outcome or which are trading in 'value zone', offering respite. Banking sector is one such sector, said Prabhudas Lilladher. The broking firm said banks are a good hedge in the current situation, as many of them are trading at significantly lower price to book value than their historical averages.
"Although banks can suffer in case of India de-rating, PSU banks have higher risk and private banks seem better placed. We are capping max weight on any stock to 10 per cent. We are increasing weight on Kotak from 2.8 per cent to 3.7 per cent as RBI led restrictions will have only temporary impact on its performance and risk reward looks favorable at 1.6xFY26 P/ABV," PL said on its model portfolio.
The domestic broking firm looked into sectors and stocks that remain a good bet, irrespective of regime in power.
It has turned 'overweight' on consumer sector after 2.5 years, as twin benefits of green shoots in rural India and normal monsoons will boost demand for staples. "Moreover, any potential freebies post elections can significantly re-rate sector. We increase weight behind HUL, ITC, Britannia and Titan(should rebound in H225)," it said.
PL said it is 'overweight' on healthcare as it believes pharma and hospitals remains a defensive play. It likes Hospitals led by Max Healthcare Institute, given gains from brownfield expansion in Mumbai and NCR and acquisitions.
The brokerage's overweight on capital goods is due to its hopes that some of the technology changes on T&D, renewables, Data centers and AI would be structural.
"We believe defence, PSU has and infra have the risk of regime change and we cut weight on L&T by 100bps. We believe technology leaders like ABB, Siemens, Schneider, GE, Honeywell, Hitachi etc. will not be impacted by political turmoil and remain a good play irrespective of the regime," it said.
PL stayed 'underweight' on IT services as recovery in IT services is delayed. It believes that segments like EDS, Data Analytics, Digital, Artificial intelligence and supply chain etc. will drive growth in next cycle; however, the sector can be defensive hedge in run upto elections.
It is 'overweight' on automobiles and suggested Hero MotoCorp Ltd as a proxy on rural demand revival and add it to model portfolio.
"We also increase weight significantly on Maruti Suzuki and M&M. We believe M&M can gain from strong SUV demand and upsurge in tractor demand post normal monsoons, any potential benefits to agriculture can be an icing on the cake," it said.
It stayed 'overweight' on telecom, especially on Bharti Airtel, as the sector offers secular growth with least risk. "We believe completion of 5G auctions and tariff hike post elections/ JIO platforms demerger will be a key trigger in the medium term," it said.
Meanwhile, PL is 'underweight' on oil and gas. It is avoiding all PSUs. "We cut weight on RIL to 10 per cent (max for any stock) as a formidable play on Retail, telecom and new energy," PL said.