JM Financial has launched the India Model Portfolio. The well-known domestic brokerage house is looking at a combination of factors like earnings, outlook, sector specific movement coupled with macroeconomic indicators in putting together the portfolio. Based on the relative earnings expectations, the Model Portfolio is ‘overweight’ on banks, real estate, REITs and hotels, telecom, infrastructure, defence, oil & gas, NBFCs, insurance and metals. In contrast they are underweight on utilities, pharma and select consumer plays.
Large caps cheaper than small and midcaps?
According to JM Financial, absolute valuations of large, small, and midcaps are not cheap. However, “looking at FY26E absolute P/E, one might interpret that midcaps are the most expensive.”
They are basing this on the relative earnings projections. The Nifty Midcap 100 earnings for FY26 is seen at 29.3x, followed by Nifty Smallcap at 25.2x and large caps are the cheapest. The Nifty50 earnings for FY26 is seen at 20.6x.
However, they added that. “if one looks at FY26E PEG, one might interpret that midcaps are the cheapest (Nifty Midcap 100 at 1.3x), followed by small caps (Nifty Smallcap 100x at 1.7x) and large caps being the most expensive (Nifty50 at 1.9x).”
JM Financial on three big factors impacting sentiment
JM Financial has taken into consideration, three key factors in bringing together the model portfolio
EPS downgrade cycle is not over yet: The earnings cycle is a key factor to watch. In April, JM Financial cut FY26 and FY27 earnings estimates by 1.1% and 1%.
According to them, “the EPS downgrade cycle continues as the earnings estimate cuts in April are sharper than in February/March.”
RBI prioritising growth over inflation: According to them, “there is a clear shift in the approach of the monetary policy post the change of guard at the helm of the RBI.” They believe that “Governor Malhotra’s focus is on addressing growth concerns, while his predecessor Governor Das had a hawk eye on price stability.” As a result, they expect that “comfortable inflation would allow the RBI to accommodate further rate cuts to the tune of 50bps in this cycle.”
Focus on capex and consumption: JM Financial is betting big on the capex and consumption focus in the current Budget. According to them the “capex allocation of Rs 11.2 trillion for FY26 is substantial and should drive growth in the upcoming fiscal.”
Rural consumption has been consistently improving from the lower base of last year, while urban consumption witnessed a slight moderation, as per Nielsen IQ survey.
The other key factor, according to them, is the favourable weather condition, “due to the onset of La Nina conditions and above-normal monsoon should support the rural economy in the coming year.” This is also expected to boost consumption and “keep inflationary pressures in the food basket under check.”