JM Financial Bets on Banks, Defence, and Infra

19 May 2025 CW Team

JM Financial's portfolio reflects a +119 basis points (bps) overweight on banks, with key picks including ICICI Bank, Axis Bank, HDFC Bank, SBI, and DCB Bank. It has also taken an overweight position in real estate, REITs and hotels (+85 bps), telecom (+69 bps, led by Bharti Airtel), infrastructure (+52 bps via L&T), defence (+49 bps with BEL), oil & gas (+37 bps with RIL), NBFCs and AMCs (+28 bps including Bajaj Finance, Shriram Finance, and Nuvama Wealth), insurance (+24 bps featuring HDFC Life and ICICI Lombard), and metals (+23 bps with Hindalco, JSPL, and Tata Steel).

The brokerage remains neutral on IT services and automobile stocks, while significantly underweight on internet businesses (-198 bps), utilities (-106 bps despite a preference for NTPC and JSW Energy), cement (-96 bps, favouring Ultratech), pharmaceuticals (-44 bps, with a tilt towards hospitals and contract development and manufacturing organisations), and consumer staples (-44 bps, although names like Titan, Havells, Varun Beverages, and Britannia are favoured).

The brokerage’s outlook is anchored in a shift in RBI policy under the new Governor, Malhotra, who appears more focused on growth than inflation, contrasting the approach of his predecessor, Shaktikanta Das. JM Financial expects the RBI to cut rates by up to 50 basis points in this cycle due to manageable inflation levels.

The report also points to a revival in capital expenditure post-elections, supported by the Union government’s allocation of Rs 11.2 trillion (approximately £106 billion) for FY26. Rural consumption is on a recovery path aided by a low base and favourable monsoon outlook, although urban demand shows some signs of moderation.

Despite these tailwinds, the brokerage remains cautious on valuations. All major indices—large-cap, mid-cap, and small-cap—are trading at least one standard deviation above their historical averages. In absolute FY26 P/E terms, large caps (Nifty50 at 20.6x) are cheapest, followed by small caps (25.2x) and midcaps (29.3x). However, on a PEG basis, midcaps appear most attractive (1.3x), ahead of small caps (1.7x) and large caps (1.9x).

JM Financial also flagged the continuation of the earnings downgrade cycle. Although Nifty50 EPS estimates for FY25 rose marginally by 0.3 per cent in April, estimates for FY26 and FY27 were trimmed by 1.1 per cent and 1.0 per cent, respectively—marking steeper cuts than those in February and March.

JM Financial’s model portfolio reflects cautious optimism, with a tilt towards cyclical and rate-sensitive sectors in anticipation of a capex-driven recovery and dovish monetary stance. However, concerns over valuation and earnings cuts prompt a more selective stance—especially in high-growth but overvalued sectors like internet and utilities. The brokerage advises investors to maintain balanced exposure across market caps while staying alert to relative growth metrics and sector fundamentals.

Image source:www.jmfinancialservices.in

JM Financial has unveiled its India Model Portfolio with a strategic overweight on sectors such as banking, real estate, telecom, infrastructure, and defence, while maintaining an underweight position on internet platforms, utilities, cement, pharmaceuticals, and consumer staples. The brokerage described this sectoral positioning as part of a broader thematic view influenced by improving macroeconomic indicators, a more growth-oriented Reserve Bank of India (RBI), and valuation divergences across market capitalisations.JM Financial's portfolio reflects a +119 basis points (bps) overweight on banks, with key picks including ICICI Bank, Axis Bank, HDFC Bank, SBI, and DCB Bank. It has also taken an overweight position in real estate, REITs and hotels (+85 bps), telecom (+69 bps, led by Bharti Airtel), infrastructure (+52 bps via L&T), defence (+49 bps with BEL), oil & gas (+37 bps with RIL), NBFCs and AMCs (+28 bps including Bajaj Finance, Shriram Finance, and Nuvama Wealth), insurance (+24 bps featuring HDFC Life and ICICI Lombard), and metals (+23 bps with Hindalco, JSPL, and Tata Steel).The brokerage remains neutral on IT services and automobile stocks, while significantly underweight on internet businesses (-198 bps), utilities (-106 bps despite a preference for NTPC and JSW Energy), cement (-96 bps, favouring Ultratech), pharmaceuticals (-44 bps, with a tilt towards hospitals and contract development and manufacturing organisations), and consumer staples (-44 bps, although names like Titan, Havells, Varun Beverages, and Britannia are favoured).The brokerage’s outlook is anchored in a shift in RBI policy under the new Governor, Malhotra, who appears more focused on growth than inflation, contrasting the approach of his predecessor, Shaktikanta Das. JM Financial expects the RBI to cut rates by up to 50 basis points in this cycle due to manageable inflation levels.The report also points to a revival in capital expenditure post-elections, supported by the Union government’s allocation of Rs 11.2 trillion (approximately £106 billion) for FY26. Rural consumption is on a recovery path aided by a low base and favourable monsoon outlook, although urban demand shows some signs of moderation.Despite these tailwinds, the brokerage remains cautious on valuations. All major indices—large-cap, mid-cap, and small-cap—are trading at least one standard deviation above their historical averages. In absolute FY26 P/E terms, large caps (Nifty50 at 20.6x) are cheapest, followed by small caps (25.2x) and midcaps (29.3x). However, on a PEG basis, midcaps appear most attractive (1.3x), ahead of small caps (1.7x) and large caps (1.9x).JM Financial also flagged the continuation of the earnings downgrade cycle. Although Nifty50 EPS estimates for FY25 rose marginally by 0.3 per cent in April, estimates for FY26 and FY27 were trimmed by 1.1 per cent and 1.0 per cent, respectively—marking steeper cuts than those in February and March.JM Financial’s model portfolio reflects cautious optimism, with a tilt towards cyclical and rate-sensitive sectors in anticipation of a capex-driven recovery and dovish monetary stance. However, concerns over valuation and earnings cuts prompt a more selective stance—especially in high-growth but overvalued sectors like internet and utilities. The brokerage advises investors to maintain balanced exposure across market caps while staying alert to relative growth metrics and sector fundamentals.Image source:www.jmfinancialservices.in

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