Kotak Institutional Equities has revised its model portfolio, increasing weightages on select companies it believes are well-placed to benefit from sector-specific tailwinds, while simultaneously dropping those with weak execution and underwhelming performance.

InterGlobe Aviation and Pidilite Get a Boost

Domestic brokerage firm Kotak Institutional Equities has raised its allocation to InterGlobe Aviation (INDIGO) by 100 basis points to 2.5 percent and to Pidilite Industries (PIDI) by 40 basis points to 1.9 percent in its latest model portfolio update. The firm cited favourable industry dynamics and company-specific strengths as key drivers behind the decision.

According to Kotak, both INDIGO and PIDI are dominant players in their respective industries — aviation and adhesives/chemicals — and are well-positioned to benefit from several near-term catalysts. These include resilient demand trends, relatively lower input costs, and strong pricing power due to limited competition.

For INDIGO, lower aviation turbine fuel (ATF) prices are likely to support margins, while for Pidilite, the decline in crude oil derivatives prices is expected to cushion costs. Additionally, a potentially stronger Indian Rupee could provide a tailwind for both firms, further enhancing earnings predictability.

Dabur Dropped from Portfolio

While strengthening its position in select counters, Kotak trimmed its weight in Dabur by 140 basis points, ultimately removing it from the model portfolio. The brokerage pointed to Dabur’s inability to execute effectively in recent quarters despite having a strong rural-facing portfolio and favourable demand dynamics in rural India.

Kotak noted that Dabur has not capitalised on rural tailwinds, and continued underperformance has weighed on investor confidence, prompting the firm to cut exposure altogether.

Banking Remains Top Sector Bet

Despite the tactical reshuffle in specific stocks, Kotak’s model portfolio remains heavily skewed towards the banking sector, which commands a 36.5 percent allocation. The brokerage maintains significant exposure to private and public sector lenders, including Axis Bank, HDFC Bank, ICICI Bank, IndusInd Bank, and SBI.

Diversified financials also find a place in the portfolio through Bajaj Finance and Shriram Finance, which together represent a 3.6 percent weight.

IT, Pharma, and Energy Maintain Significant Share

The Information Technology (IT) sector contributes 9.8 percent, represented by Infosys, TCS, and Tech Mahindra, while the oil, gas, and consumable fuels sector, led by Reliance Industries, holds a 9 percent weight.

Pharmaceuticals, including Cipla, Lupin, Mankind Pharma, and Sun Pharma, make up 8.5 percent of the allocation. Meanwhile, healthcare services and insurance—featuring Apollo Hospitals, Dr Lal Pathlabs, HDFC Life, and ICICI Prudential Life—are also well-represented in the portfolio.

Market Outlook: Resilience Amid Risks, but Valuations a Concern

In its market commentary, Kotak Institutional Equities noted that despite escalating geopolitical tensions, particularly between India and Pakistan, the Indian equity market has shown resilience over the past month. The brokerage attributed this stability to positive developments such as the resolution of trade and tariff disputes with the US and a general easing of geopolitical risks.

Kotak also highlighted strong Foreign Portfolio Investor (FPI) inflows, driven by India’s comparatively robust macroeconomic fundamentals amid global uncertainty.

However, the brokerage struck a cautious tone on the ongoing earnings season. It described Q4FY25 results as “broadly muted,” with Nifty-50 earnings growing by just 4.8 percent year-on-year. The gains have been largely led by banks and downstream oil marketing companies, while consumer sector companies continue to face weak volume growth and margin headwinds.

Valuation Concerns Persist

While the market remains buoyant, Kotak warned that Nifty-50 valuations remain elevated, which could pose downside risks if earnings fail to meet expectations in the coming quarters. It expressed particular concern over sectors like banking and telecommunications, which are trading at near full valuations.

The brokerage advised a measured approach, especially when it comes to mid- and small-cap stocks, many of which remain vulnerable amid broader market volatility.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.