According to the domestic brokerage firm, both companies are positioned as dominant players in their respective sectors, benefiting from several near-term tailwinds.
These include reasonable demand compared to other consumer categories, low raw material prices – specifically, aviation turbine fuel (ATF) for INDIGO and crude oil derivatives for PIDI – and strong pricing power amid weak competition in their respective markets.
Furthermore, a potentially stronger Indian Rupee (INR) could provide additional support to these companies.
On the other hand, Kotak has reduced its weight in Dabur by 140 basis points, citing the company’s inability to turn around performance despite favorable rural demand and a strong product portfolio targeting rural markets. Dabur has struggled to execute well in recent quarters and has been removed from the model portfolio as a result.
In its latest model portfolio, Kotak Institutional Equities has allocated the highest weightage to the banking sector, with a significant 36.5% exposure. Axis Bank, HDFC Bank, ICICI Bank, IndusInd Bank, and State Bank of India remain key holdings within the banking segment. The firm maintains exposure to diversified financials with Bajaj Finance and Shriram Finance, representing a combined 3.6% weightage.Healthcare services and insurance sectors have also been assigned substantial weights, including Apollo Hospitals, Dr Lal Pathlabs, HDFC Life Insurance, and ICICI Prudential Life.Also read: Swiggy plunges 6% to 52-week low after lock-in expiry unlocks 83% shareholding
Information Technology (IT) services, comprising Infosys, TCS, and Tech Mahindra, account for 9.8% of the portfolio. Meanwhile, the oil, gas, and consumable fuels sector, led by Reliance Industries, holds a 9% allocation.
Pharmaceuticals, including Cipla, Lupin, Mankind Pharma, and Sun Pharmaceuticals, collectively contribute 8.5% to the model portfolio.
In its market outlook, Kotak Institutional Equities notes that despite the escalation of geopolitical tensions between India and Pakistan, the market has remained resilient over the past month. The brokerage attributes the market’s steady performance to the resolution of trade and tariff disputes with the US and the easing of geopolitical risks.
Kotak also highlights a recent surge in Foreign Portfolio Investor (FPI) inflows, driven by India’s relatively stronger macroeconomic outlook amid global uncertainties.
However, the brokerage firm remains cautious about the earnings season, describing it as “broadly muted,” with Nifty-50 earnings growing by 4.8% year-on-year in Q4FY25. The brokerage firm points out that banks and downstream oil marketing companies have been the primary contributors to earnings growth, while consumer companies have reported weak volume growth and persistent margin pressures.
Despite the mixed earnings performance, Kotak warns that valuations in the Nifty-50 index remain elevated, posing potential downside risks if earnings disappoint in the upcoming quarters. Sectors such as banking and telecommunications are trading at near full valuations, and the brokerage advises caution, particularly for mid- and small-cap stocks, which continue to face pressure amid broader market challenges.
Also read: Defence stocks: There are many sides to a story. 10 defence stocks with upside potential of up to 48%
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
