Brokerage changes model portfolio on low Q2 earnings, lists top stocks to buy

On the back of a lackluster Q2FY25 earnings season, many top brokerages have made changes to their model portfolios and come out with their preferred stocks and buy recommendations. ETMarkets brings a list of top stocks, which are part of the model portfolio of Motilal Oswal Financial Services (MOFSL), Nuwama Institutional Equities and Kotak Institutional Equities.

The Nifty reported a 4% rise in net profit year-on-year, slightly ahead of MOFSL’s estimate of 3%. “Corporate earnings in India for the second quarter of fiscal 2025 reflect weak performance,” the brokerage said, adding that this marked the second consecutive quarter of single-digit growth since the pandemic recovery began in mid-2020.

While acknowledging the earnings as “weak”, Kotak Institutional Equities maintained that the net profit for the Nifty Pack was still higher than its expectations. The Nifty 50 index’s adjusted net profit rose 5% YoY, which was 1.2% higher than expectations of 3.7% YoY growth on strong SBI numbers and better-than-expected other income in ONGC’s case, the brokerage said.

What to buy?

Following a nearly 10% correction from its peak in the Nifty, Motilal Oswal has made significant changes to its model portfolio where it has increased weightage in BFSI, technology and healthcare with a distinct bias towards large-caps. “We are OW on IT, Healthcare, BFSI, Consumer Discretionary, Industrial and Real Estate. In contrast, we are UW on Metals, Energy and Automobile,” the brokerage said.

Motilal’s preferred largecap ideas are HDFC Bank, Bharti Airtel, ICICI Bank, State Bank of India (SBI), HCL Technologies, Larsen & Toubro (L&T), Mahindra & Mahindra (M&M), Power Grid Corporation, Titan Company, Trent and Mankind Pharma. . .

He has 11 more stocks to buy, but in the small and midcap space ie. Indian Hotels Company (IHCL), Cummins India, Persistent Systems, Dixon Technologies, Godrej Properties, Coforge, Metro Brands, Global Health (Medanta), Angel One, PNB Housing Finance and Salo World.

Nuwama Institutional Equities is overweight on consumer, private banks, insurance, telecom, IT, pharma and cement, while underweight on industrials, auto, metals and PSUs.

Nuwama said in its note that earnings downgrade risks remain, although valuations are still very high and close to historical peaks, suggesting more downside ahead.

The local brokerage has upgraded its ratings on 20 stocks while downgrading a dozen others.

The upgrade includes UPL, Eicher Motors, Bank of Baroda (BoB), Bharat Electronics (BEL), NBCC, Dixon Technologies, Larsen & Toubro (L&T), Supreme Industries, Delhivery, Godrej Properties and Anupam Chemicals.

Downgrades include Indraprastha Gas (IGL), Mahanagar Gas (MGL), Bajaj Finserv, Kfin Technologies, PNC Infratech, InterGlobe Aviation (Indigo), FirstSource Solutions, Blue Dart Express, Gujarat Gas, IHCL and Indiamart and JSW Steel.

Among Nifty companies, Nuwama is most bullish on ICICI Bank and Axis Bank and underweight on HDFC Bank and SBI. It is overweight Bharti Airtel, HUL, Britannia Industries, ITC, Wipro, Infosys, LTIMindtree, Sun Pharma, Grasim Industries and Ultratech.

While it weighs less on autos, M&M and Maruti Suzuki are the preferred choices.

Kotak Institutional Equities has added Godrej Consumer Products (GCPL) after removing it three months ago, targeting future growth potential.

The brokerage has also reduced weight on Hindustan Unilever (HUL), ICICI Bank (100 bps to 9.7% and below stock threshold 10) and removed Pidilite Industries. Kotak’s model portfolio includes stocks from various sectors like BFSI (Heaviest Weight), Auto, Consumer, Capital Goods and Insurance.

After ICICI Bank, the next highest weightage is given to HDFC Bank (8.6), followed by SBI (7) and Axis Bank (6.6). M&M is the only largecap auto stock in its model portfolio. In capital goods it is L&T and Cummins India.

Other notable players are Britannia Industries, Apollo Hospitals, HUL, United Spirits and HDFC Life Insurance Company.

Also Read: BFSI’s 15% YoY Q2 Earnings Growth Beats Nifty HDFC Bank, ICICI Bank analysts are among the top bets

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)