JM Financial launches India model portfolio with bullish bets on banks, infra and defence

JM Financial has officially launched its India Model Portfolio, outlining a strategic overweight stance on a host of sectors including banks, real estate, telecom, infrastructure, and defence, while turning underweight on internet-based businesses, utilities, cement, pharmaceuticals, and consumer staples. The brokerage highlighted this tactical allocation as part of a broader thematic view driven by improving macro indicators, evolving RBI stance, and valuation dispersion across market caps.

Model Portfolio

According to JM Financial, the portfolio carries a +119 basis points (bps) overweight on banks, naming ICICI Bank, Axis Bank, HDFC Bank, SBI, and DCB Bank as key picks. It also adopted an overweight view on real estate, REITs and hotels (+85 bps), telecom (+69 bps with Bharti Airtel as the top bet), infrastructure (+52 bps led by L&T), defence (+49 bps with BEL), oil & gas (+37 bps with RIL), NBFC & AMC (+28 bps with Bajaj Finance, Shriram Finance, and Nuvama Wealth), insurance (+24 bps with HDFC Life and ICICI Lombard), and metals (+23 bps with Hindalco, JSPL, and Tata Steel).

In contrast, JM Financial maintained a neutral stance on IT services and auto stocks. The brokerage downgraded its weight on internet platforms (-198 bps), utilities (-106 bps despite preference for NTPC and JSW Energy), cement (-96 bps with a bias for Ultratech), pharma (-44 bps, with a tilt toward hospitals and CDMO players over traditional pharma), and consumer staples (-44 bps, even as it favoured Titan, Havells, Varun Beverages, and Britannia within the segment).

RBI’s Growth-Focused Shift and Capex Revival Underpin Strategy

JM Financial also pointed to a critical shift in monetary policy direction under the new RBI Governor, Malhotra. The brokerage noted that the central bank is now prioritising growth over inflation, a departure from the hawkish approach of former Governor Shaktikanta Das. “We believe comfortable inflation will allow the RBI to accommodate further rate cuts of up to 50 basis points during this cycle,” JM Financial said.

Commenting on macroeconomic levers, JM Financial noted that capex momentum was briefly impacted by the FY25 general elections. However, with the government announcing a robust INR 11.2 trillion allocation for FY26, the brokerage expects this capital expenditure to drive economic growth. On the consumption side, it observed continued recovery in rural demand, supported by a low base and potential for above-normal monsoons due to La Niña conditions. Urban consumption, however, showed signs of slight moderation, according to data from Nielsen IQ.

Despite a supportive macro backdrop, JM Financial flagged concerns around valuations. The brokerage warned that large-cap, mid-cap, and small-cap indices are all trading at one standard deviation or more above their historical mean. In terms of FY26 estimated price-to-earnings (P/E) ratios, large caps (Nifty50 at 20.6x) appeared cheapest in absolute terms, compared to midcaps (Nifty Midcap 100 at 29.3x) and small caps (Nifty Smallcap at 25.2x). However, based on the FY26 price-to-earnings-to-growth (PEG) ratio, midcaps appeared most attractive (1.3x), followed by small caps (1.7x), while large caps were the costliest (1.9x).

Further, JM Financial warned that the earnings downgrade cycle is not yet over. The firm highlighted that while Nifty50 FY25 EPS estimates saw a marginal uptick of 0.3 percent in April 2025, forward estimates for FY26 and FY27 were cut by 1.1 percent and 1.0 percent, respectively. “These cuts are sharper than those seen in February and March 2025, suggesting that the downgrade cycle is still ongoing,” the brokerage added.

In conclusion, JM Financial’s India Model Portfolio reflects a cautiously optimistic market outlook, anchored by expectations of a capex-driven growth revival and a dovish RBI. Its overweight stance on cyclical and rate-sensitive sectors like banks, infrastructure, and real estate signals a bias toward economic recovery themes. However, with persistent earnings downgrades and stretched valuations in broader indices, the brokerage has advised a prudent approach, especially in internet and utility sectors. Investors are urged to stay selective and balance exposure across market caps with a sharp eye on relative growth metrics.

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.