Emkay Institutional Equities, a part of Emkay Global Financial Services Limited, is overweight on discretionary, real estate, and healthcare stocks, while remaining neutral on industrials, IT, and energy. It is, however, underweight on financials, staples, and materials stocks ‘due to structural concerns and valuation pressures’.
In stock analysis, the term 'overweight' refers to a stock that is expected to outperform others in its sector, while 'underweight' is used when the opposite is expected.
The brokerage anticipates discretionary consumption recovery within 2-3 quarters, underpinned by a rebound in IT hiring, better liquidity conditions, and an improvement in retail lending dynamics. Additionally, state-led women-centric welfare schemes and robust winter crop sowing are likely to bolster consumption trends.
In terms of sectoral shift, It has downgraded energy and technology to neutral, and upgraded consumer discretionary to overweight, and continued underweight positioning on financials and staples.
Zomato, Tata Motors top large-cap picks
The firm’s top investment suggestions include Lupin, Zomato, Tata Motors, IndusInd Bank in large caps. While, Escorts, Paytm, Metropolis in midcaps, and Stovekraft, and Quess Corp in the small cap segment.
Corporate earnings
The earnings downgrade cycle appears to be concluding, with consensus Nifty estimates for FY26 already adjusting downward by 3.9% since January 2025. The firm remains constructive on mid-teens earnings growth for FY26, driven by Financials, Metals, and Energy.
FPI selling expected to subside
Despite persistent selling pressures, the firm believes FPI activity is likely to stabilise post-1QCY25, with valuations having moderated and earnings forecasts bottoming out over the next 2-3 months. “A peak in the US Dollar Index (DXY) should also ease rupee depreciation concerns and help stem FPI selling. The RBI’s liquidity injection could stimulate domestic equities and benefit the BFSI sector,” it said on Tuesday.
Emkay Institutional Equities believed that after a 31% CAGR in capex growth between FY21-24, a slowdown to 10-13% is anticipated, primarily due to election-related spending constraints. However, a rebound in FY26 is expected as policy certainty returns. While capital-heavy sectors face challenges, green energy continues to be a bright spot.
Nirav Sheth, CEO - Institutional Equities, Emkay Global Financial Services stated: “Markets tend to over-react and overextend on both, the upside and the downside. The bottoming process is usually volatile which we are currently witnessing. Our macros are solid, given the low and stable CAD, fiscal deficit under control, and a more accommodative monetary policy now. We estimate that the worst of the earnings downgrade cycle is behind us and expect a recovery in the second half of the fiscal – triggered by renewed government spending and tax relief led consumption spend. It is time to buy.”
Seshadri Sen, Head of Research and Strategist – Institutional Equities, Emkay Global Financial Services added: “Despite short-term headwinds, the structural investment case for India remains intact. The shift in sectoral dynamics presents opportunities, particularly in Discretionary, Real Estate, and Healthcare, where we see strong growth potential.”