Kotak Institutional Equities has made three changes to its model portfolio in the wake of the recent market correction. It has raised exposure to Bajaj Finance and Eternal, two names where it sees upside of up to 70% over the next 12 months. Meanwhile, it has now exited IndusInd Bank.
The brokerage has avoided a broad reshuffle and instead opted for selective reallocation within financials and related segments, citing better opportunities emerging after the sell-off triggered by geopolitical tensions.
It said the correction across stocks appears excessive relative to the likely impact on earnings, and that the current phase offers a chance to redeploy capital into stronger ideas where valuations have become more attractive.
Kotak on Bajaj Finance: Buy
Kotak Institutional Equities has raised its allocation to Bajaj Finance to 480 basis points from 320 basis points earlier after the stock declined 11% since February 27, 2026. The brokerage has set a target price of Rs 2,500, implying an upside of 41% over the next 12 months.
The firm said the correction has improved the risk-reward for Bajaj Finance, given its consistent growth trajectory and strong positioning within the lending space. While it acknowledged that near-term volatility could persist, it maintained that the company’s long-term outlook remains intact.
“We like the long-term prospects of these companies compared with IIB’s,” Kotak Institutional Equities said.
It added that any downside risks to near-term earnings are likely to be moderate and do not change the broader investment case. The increase in allocation reflects higher conviction after the stock’s recent fall.
Kotak on Eternal: Buy
Kotak Institutional Equities has increased its allocation to Eternal to 210 basis points from 60 basis points earlier after the stock corrected 10% during the same period. The brokerage has assigned a target price of Rs 375, indicating an upside potential of 70% over the next 12 months.
The firm said Eternal stands out after the correction due to its earnings visibility and positioning, which it believes the market has not fully priced in following the recent decline.
“We note moderate downside risks to near-term earnings and fair values and near-term volatility in stock prices, but do not see any fundamental change in the business model or value of the companies,” Kotak said.
The brokerage’s decision to significantly raise exposure signals that it sees a sharper gap between price and value in Eternal compared with other names in its coverage universe.
Kotak on IndusInd Bank: Removed
Kotak Institutional Equities has removed IndusInd Bank from its model portfolio, reallocating its entire 220 basis point exposure to Bajaj Finance and Eternal.
The brokerage noted that IndusInd Bank remains inexpensive, trading at around 1x one-year forward book value, but chose to exit the position in favour of stocks offering higher return potential after the recent correction.
“IIB (IndusInd Bank) is quite inexpensive at current levels, but we find better opportunities elsewhere given the sharp correction in other parts of the market,” Kotak Institutional Equities said.
The move indicates that the firm is prioritising relative upside over absolute valuation, even when the stock being removed is not fundamentally weak.
Limited churn, sharper bets
Kotak Institutional Equities has kept overall changes to its model portfolio limited, even as it advised broader portfolio churn across the market.
The brokerage said recent price decline suggests markets may be assuming a lasting hit to earnings, which it does not expect to materialise.
“We do not see long-standing damage to businesses based on a few weeks of disruption of energy supplies,” the firm said.
It added that earnings from one or two quarters form a small part of a company’s total value, and therefore, sharp corrections across stocks may not be justified.
Conclusion
Kotak Institutional Equities has made three focused changes to its model portfolio by exiting IndusInd Bank and increasing exposure to Bajaj Finance and Eternal.
The brokerage’s approach suggests a preference for reallocating capital within sectors rather than making sweeping changes, with an emphasis on stocks where the recent correction has created a more favourable entry point without altering long-term business fundamentals.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.