Kotak Institutional Equities has made a notable change to its model portfolio at a time when markets have seen a sharp fall triggered by geopolitical tension. The brokerage has added Oil and Natural Gas Corporation (ONGC) and removed ITC in its model portfolio.
The decision, as indicated in the firm’s latest strategy report, is rooted in relative upside and valuation comfort after the correction across sectors. Benchmark indices have declined meaningfully since the start of the conflict, and Kotak believes this has opened up better opportunities in parts of the market that saw deeper price cuts.
While ITC continues to offer an estimated upside of about 16%, Oil And Natural Gas Corporation stands out with a higher potential upside of around 30%, prompting the brokerage to increase exposure to the oil and gas space.
Kotak Institutional Equities on ONGC
Kotak Institutional Equities has added Oil and Natural Gas Corporation to its large-cap model portfolio with a weight of 150 basis points, assigning a 12-month fair value of Rs 375. This implies an upside of approximately 30% from current levels, according to the report.
The brokerage has pointed to attractive valuations as a key reason behind the call. ONGC is trading at about 4.8 times its estimated earnings for financial year 2027 and around 5.2 times for financial year 2028, which is significantly lower than broader market multiples.
Kotak has also indicated that its earlier reservations about public sector oil companies are easing, citing recent policy developments and pricing actions.
“ONGC scores better on these parameters versus other PSU oil companies. More importantly, the government’s recent amendment to the ORDA Act and pricing actions during the Iran-Israel/US conflict with respect to prices of downstream and upstream oil products raise hopes about a stable policy regime for crude oil and natural gas,” Kotak Institutional Equities says.
The brokerage has based its estimates on crude oil prices of 85 dollars per barrel for financial year 2027 and 75 dollars per barrel for financial year 2028. With oil prices remaining sensitive to supply disruptions, ONGC’s earnings outlook remains supported under current conditions.
Kotak’s move to add ONGC also indicates a preference for sectors that are directly linked to global commodity trends, particularly at a time when energy markets remain in focus due to ongoing geopolitical developments.
Kotak Institutional Equities on ITC
Kotak Institutional Equities has set a 12-month fair value of Rs 338 for ITC, which translates into an upside of about 16%. Despite this positive upside, the brokerage has removed the stock from its model portfolio.
The report notes that ITC has performed relatively better than most stocks during the recent correction, which has limited the decline in its share price compared to other sectors.
“ITC stock has held up better in the recent correction in the market. However, we now find several stocks with a better reward-risk balance, given the sharp correction in stock prices in most parts of the market in recent weeks,” Kotak Institutional Equities adds.
The brokerage’s stance suggests that while ITC remains fundamentally stable, the scope for gains is relatively lower when compared with stocks that have seen sharper corrections and now offer higher upside.
This relative positioning has led Kotak to reallocate capital toward opportunities where valuations have become more attractive after the fall in prices.
Kotak’s stance after the market fall
Kotak Institutional Equities has maintained that recent market behaviour has been heavily influenced by negative news around geopolitical tensions and supply disruptions. At the same time, the brokerage has cautioned against extending current trends too far into the future.
“The negative news cycle of the past few weeks appears to have hypnotized market participants into extrapolating the current negative environment in perpetuity,” the report says.
The firm has also stated that calling the exact bottom of the market is not possible, even as valuations across several sectors have corrected meaningfully.
What emerges from the report is a preference for stocks where the fall in prices has been sharper, creating better entry levels, as against those that have shown resilience and therefore offer relatively lower upside.
Conclusion
Kotak Institutional Equities’ latest portfolio adjustment rests on a comparison of upside potential within a correcting market. Oil And Natural Gas Corporation with an estimated upside of about 30%, has been added as the brokerage sees stronger valuation support and improving policy conditions. ITC, despite offering an estimated upside of around 16%, has been removed as its relative return potential appears lower after holding up during the recent decline.
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.