JM Financial launches India model portfolio, ICICI Bank, RIL, BEL, Hindalco among top picks

JM Financial has introduced its India Model Portfolio, strategically positioning itself with an overweight on several key sectors. The portfolio favours banks, real estate, REITs and hotels, as well as telecom, infrastructure, defence, and oil & gas. Notable companies highlighted include ICICI, Axis, and HDFC in the banking sector, and Bharti in telecom.

It has also picked DLF, Embassy and Chalet from REITs & Hotels, L&T from Infrastructure, BEL from Defence, RIL from Oil & Gas, Bajaj Finance, Shriram and Nuvama Wealth from NBFC & AMC, HDFC Life and ICICI Lombard from  Insurance and Hindalco, JSPL and Tata Steel from metals spaces.

The portfolio is notably underweight on internet, utilities, cement, pharma, and consumer sectors. Specific preferences are noted for companies such as NTPC and JSW Energy in utilities and Titan and Britannia in the consumer sector. "Underweight sectors – Internet, utilities (we like NTPC and JSW Energy), cement (we like Ultratech), pharma (hospitals over CDMO pharma) and consumer (we like Titan, Havells, Varun Beverages and Britannia)," said the brokerage firm.

Valuation analyses reveal that large, mid, and small cap indices are trading above their mean, indicating high valuations. For FY26E, midcaps are the most expensive in terms of absolute P/E, yet the cheapest when considering PEG ratios. Conversely, large caps are the cheapest on an absolute P/E basis but most expensive on a PEG basis.

The capital expenditure (capex) allocation for FY26 is substantial, set at Rs 11.2 lakh crore. This allocation aims to drive growth in the next fiscal year, with rural consumption showing consistent improvement. A Nielsen IQ survey highlighted that while rural consumption rises, urban consumption has slightly moderated. Favourable weather and abundant food production are expected to keep inflationary pressures in check.

Inflation management remains a priority, with the Reserve Bank of India (RBI) under Governor Malhotra likely to focus on growth concerns. JM Financial noted that "comfortable inflation would allow the RBI to accommodate further rate cuts to the tune of 50bps in this cycle."

Despite a slight uptick in Nifty50 EPS estimates for FY25E, the EPS downgrade cycle persists, with sharper cuts for FY26 and FY27 estimates. "However, the EPS downgrade cycle continues given FY26E/27E cuts in Apr’25 are sharper than that in Feb’25 (0.9/0.6%) and Mar’25 (0.2/0.6%)," said JM Financial. This ongoing revision reflects market uncertainties and muted analyst expectations.

The strategic overweight and underweight stances in JM Financial's portfolio highlight a targeted approach towards sectors expected to thrive in the current economic climate. With an emphasis on growth and stability, the portfolio reflects broader market trends and economic conditions anticipated in the near future.

Investors and market analysts are closely watching these developments amidst a landscape of high valuations and evolving economic policies. As the market navigates potential rate cuts and EPS adjustments, JM Financial's portfolio offers a glimpse into strategic positioning amid these dynamics.