Kotak portfolio adds five midcaps, sets out rebound triggers

Kotak portfolio changes outlined in an October 27, 2026 strategy update added five midcap stocks as the brokerage argued that recent market declines had created more attractive valuations. Kotak Institutional Equities identified three possible catalysts for an Indian equity recovery: an enduring end to the Iran-US conflict and normalization of oil prices, reassuring quarterly earnings, and greater investor attention to valuations rather than price movements and fund flows.

Key Takeaways

• Kotak added five midcaps and broadened exposure through changes to its large-cap model portfolio.
• The brokerage’s rebound case depends partly on easing oil-related pressure, not valuations alone.
• Nifty 50 quarterly profits reported so far were above Kotak’s estimates, offering some reassurance on earnings.

Kotak portfolio changes broaden stock exposure

The brokerage added Aster Dam, Dixon Tech, Emcure Pharma, Endurance Technologies and Indegene to its midcap model portfolio. It also moved Mankind Pharma from its midcap allocation into the large-cap category.

Within large caps, Kotak replaced Bajaj Finserv with Bajaj Finance, describing the latter as a more direct exposure. It increased Reliance Industries’ weight while reducing several financial-services and technology positions.

These are changes to a model portfolio, rather than evidence of completed transactions by a fund. Kotak said the adjustments sought to broaden the portfolio after divergent stock-price performance over the preceding nine to 12 months.

Oil relief is a conditional recovery catalyst

Kotak’s first potential catalyst was a durable end to the Iran-US war and an associated normalization in crude prices. The brokerage said the diplomatic stalemate, escalation risks and domestic monsoon concerns left little prospect of immediate relief for India’s macroeconomic pressures.

The Reserve Bank of India Bulletin’s July 2025 study of oil prices and inflation explains the economic channel behind that concern. Its models suggested that a 10 per cent rise in global crude prices could increase Indian headline inflation by around 20 basis points, with government fuel-tax interventions influencing the pass-through. This is historical research, not an estimate of the October 2026 situation.

Kotak also identified a shift toward assessing business value and valuations, rather than following prices and flows, as a possible recovery catalyst. It said an equity capital-gains tax reduction could support sentiment, but considered such a change unlikely; no policy announcement was identified.

Quarterly earnings offer a partial counterweight

The second-quarter FY2027 earnings season was another potential source of reassurance. Kotak said aggregate Nifty 50 constituent net profit reported so far was 1.7% above its estimates and 19% higher than a year earlier. Those figures describe the results available at the time, not a completed season.

The brokerage pointed to limited reductions in FY2027–FY2028 earnings estimates in recent months and strong results so far. It contrasted that with earnings downgrades that it said had contributed materially to weak market performance during FY2025–FY2026.

The distinction is important: cheaper share prices underpin Kotak’s valuation argument, while sustained earnings delivery and easing macroeconomic pressure remain conditions for its recovery case.

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