JM Financial has rejigged its model portfolio. The brokerage has overall maintained its rating across the sectors, but turned OverWeight on NBFC and infra. It has retained a bullish stance on the consumption sector. The reason is simple Government of India and the Reserve Bank of India’s steps to boost consumption through income tax cuts, interest rate cuts, an increase in banking system liquidity, and GST rate reduction led to this change in positive rating.
JM Financial turns OverWeight on NBFC
NBFCs outperformed banks in the second quarter, with 27% YoY PAT growth, led by diversified lenders. This was driven by healthy disbursements, stable to improving asset quality, and margin expansion (10 bps QoQ). “We expect further improvement in NBFC performance in the second half of FY26 due to improved growth, NIM expansion, and lower credit costs. Rate cuts should also be a positive catalyst,” said JM Financial. This led the brokerage house to upgrade the sector to OverWeight from Underweight.
JM Financial: Strong order inflows in Infra sector
Strong order inflows and high EBITDA delivery are expected to drive further upgrades for infra companies in FY26 and FY27. Indian infra will benefit from Middle East capital expenditure and India’s power transmission spending. Plus, surprise order inflows in the second half of FY26 could lead to FY27 EPS upgrades. In logistics, FY26 EBITDA estimates may be met or exceeded, suggesting potential for earnings upgrades, said JM Financial. Strong cash generation has also improved gearing levels and may lead to increased near-term payouts.
JM Financial stays Underweight on banks and insurance
However, the brokerage house remained Underweight on the banking sector as it explained that if there is a further rate cut, net profit growth normalisation will take even more time. It is to be noted that the brokerage came out with this report on December 04, a day ahead of the RBI MPC announcement. The RBI has slashed key lending rates by 25 bps to 5.25% in December 05.
In the report, the brokerage (before RBI MPC) said that if there are no further rate cuts, NIM improvement is expected over the next 1–2 quarters as deposit re-pricing benefits continue and CRR cuts flow through.
Also, in the insurance sector, it removed HDFC Life insurance from the model portfolio as the company reported a heavy 300 bps gross impact on margins as a result of GST 2.0. Nonetheless, JM Financial expects FY26 margins should be better than the first half of FY26.
