TCS, SBI Life lead Kotak’s portfolio rejig: 4 stocks to watch for up to 35% upside 

The brokerage has added SBI Life Insurance and Tata Consultancy Services to its large cap portfolio and increased its weight on Larsen & Toubro. In the midcap portfolio, it has added Crisil and DCB Bank, while ICICI Prudential Life Insurance has been moved from the large-cap portfolio.

Investment rationale driving Kotak’s portfolio change

Among the four fresh additions discussed in detail, SBI Life offers the highest potential upside at around 35%, followed by DCB Bank Ltd. at about 20%, TCS at 18% and Crisil Ltd. at about 15%, based on Kotak’s 12-month fair values.

“The strong rebound in several sectors, mid- and small cap stocks in the past 1-3 months has forced us to rejig our recommended portfolios, much faster than our liking. The opportunity set has narrowed, but macro and earnings outlooks have likely improved,” Kotak said.

Kotak Institutional Equities on TCS

Kotak Institutional Equities has added Tata Consultancy Services to its recommended large-cap portfolio with a weight of 150 basis points. Its 12-month fair value of Rs 2,450 offers 18% potential upside.

The inclusion, however, does not amount to an endorsement of the broader IT services sector. Kotak said the decision reflects its discomfort with maintaining a large underweight position in the sector and the inexpensive valuations of large cap IT services stocks after severe underperformance.

“TCS stock trades at 13x one-year forward EPS and offers an 18% potential upside to our 12-month fair value of Rs2,450,” Kotak said.

“However, we would clarify that the inclusion of TCS does not indicate any sort of endorsement of the IT services sector. It merely reflects our discomfort with (1) our large underweight on the sector and (2) ‘inexpensive’ valuations (at least on paper) of large cap. IT services stocks post the severe under-performance of the sector,” the brokerage said.

Kotak remains cautious about the structural questions facing IT services as artificial intelligence changes the economics of the industry. The brokerage said it has limited visibility into the duration and magnitude of potential AI-led price deflation and the resulting pressure on margins.

TCS shares have fallen 4% over the past month, 18% over three months, 35% over six months and 38% over the past year, according to the report. The stock is also down 35% in calendar year 2026 to date.

The sharp decline has made valuation more relevant to Kotak’s portfolio decision. At 13 times one-year forward earnings and with 18% potential upside to the Rs 2,450 fair value, TCS has been added despite the brokerage’s continued caution on the broader IT services sector.

Kotak Institutional Equities on SBI Life

Kotak Institutional Equities has added SBI Life Insurance to its recommended large-cap portfolio with a weight of 150 basis points. The brokerage’s 12-month fair value of Rs 2,500 offers around 35% potential upside.

The addition comes as Kotak sees banking, financial services and insurance stocks trading at relatively more attractive valuations than several consumption and investment-linked sectors. The brokerage sees consumption and investment stocks at fair-to-rich valuations, while BFSI and IT services are at cheap-to-attractive valuations.

SBI Life carries the highest potential upside among the four fresh additions. Kotak’s case rests on valuation, with the insurer trading at 1.6 times estimated financial year 2028 embedded value.

“SBI Life trades at 1.6X FY2028E EV and offers around 35% potential upside to our 12-monh FV of Rs2,500,” Kotak said in the report.

The brokerage has assigned SBI Life a 150-basis-point weight in the revised large-cap portfolio, adding insurance exposure at a time when it sees relatively attractive valuations in the broader financial sector.

Kotak Institutional Equities on Crisil

Kotak Institutional Equities has added Crisil to its recommended midcap portfolio. Its 12-month fair value of Rs 4,700 offers about 15% potential upside.

The stock has fallen 31% over the past 12 months amid concerns about the growth prospects of its research, analytics and solutions business, which Kotak said could face disruption from artificial intelligence.

“Crisil stock has fallen 31% in the past 12 months on concerns around the growth prospects of its research, analytics and solutions (RAS) business, which could be at risk from disruption from AI. Nonetheless, it has an extremely solid ratings business,” Kotak said.

The brokerage estimates that CRISIL’s domestic ratings operations, its “captive” S&P business and cash and investments account for about Rs 2,800 to Rs 3,100 of the stock’s value. On that basis, the implied valuation of the research, analytics and solutions business works out to about 15 times 12-month forward earnings.

“Our 12-month fair value of Rs4,700 offers about 15% potential upside on a 12-month basis. We estimate that the domestic ratings and ‘captive’ S&P businesses and cash and investments on balance sheet account for about Rs2,800-Rs3,100 of the CMP of Rs4,100, which would imply 15x 12-month forward P/E for the RAS business,” Kotak said.

There is, however, a distinction between Crisil inclusion in the model portfolio and Kotak’s standalone recommendation. The stock has been added to the model portfolio with a 12-month fair value of Rs 4,700, even as its formal stock rating remains ‘Reduce’.

Kotak Institutional Equities on DCB Bank

Kotak Institutional Equities has added DCB Bank to its recommended mid-cap portfolio. The brokerage has a ‘Buy’ rating on the stock with a 12-month fair value of Rs 225, implying about 20% potential upside.

Kotak’s case rests on the bank’s valuation relative to its expected return profile. DCB Bank trades at 0.9 times estimated financial year 2027 book value and 0.8 times estimated financial year 2028 book value. The brokerage expects the bank to generate return on equity of about 13% to 14% in financial years 2027 and 2028.

“DCB trades at 0.9X FY2027E BV and 0.8X FY2028E BV and will generate about 13-14% RoE in FY2027-28E. Our 12-month FV of Rs225 offers about 20% potential upside on a 12-month basis,” Kotak said.

The model portfolio table sees potential upside at 19%, while the accompanying discussion describes it as “about 20%”. The 12-month fair value remains Rs 225 in both cases.

DCB Bank’s addition also fits Kotak’s broader view that banking and financial services are among the areas of the market where valuations remain relatively attractive.

Conclusion

Kotak Institutional Equities’ latest portfolio rejig puts four fresh additions in focus: SBI Life, TCS, Crisil and DCB Bank.

Kotak expects Nifty 50 earnings to grow 17.6% in financial year 2027 and 14.1% in financial year 2028. It also sees wide differences in sector valuations, with consumption and investment stocks at fair-to-rich valuations and BFSI and IT services at cheap-to-attractive valuations.

Disclaimer: This article contains general market analysis and summary of a third-party brokerage report by Kotak Institutional Equities, detailing model portfolio changes and specific stock valuation targets. The return forecasts, fair values, and potential upsides mentioned are projections of the brokerage and do not constitute direct investment advice, a solicitation, or an offer to buy or sell any financial instruments by this publication. Equity market investments involve substantial risks, and past performance is not indicative of future results; readers are strongly advised to consult a SEBI-registered investment advisor prior to making any financial decisions.

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