Emkay Global bets on SMIDs, reduces largecap holding on valuation concerns

Emkay Global Financial has made a few changes in its investment portfolio by increasing the weightage of IndiGo, Eternal, and Dixon; check more details

Brokerage firm Emkay Global Financial has rejigged its model portfolio while taking a “cautious” near-term stance on Indian equities. According to the firm, stretched valuations and weak Q1 earnings underway warrant a more prudent approach.

 

The early-bird results for the April–June 2025 quarter (Q1FY26), which consists of samples of 176 companies, showed that Q1FY26 net sales (gross interest income for banks) of early-bird companies grew at their slowest pace in at least 16 quarters. Revenue slowdown, coupled with faster growth in operating expenses like employee costs and overheads, hit the bottom line. The combined profit before tax (PBT), excluding other income, contracted 10.3 per cent year-on-year (Y-o-Y) in Q1FY26, their worst showing since the Covid pandemic. 

Inclusion of SMIDs

Emkay Global Financial has revamped its portfolio by including certain small-and midcap stocks (SMIDs), while reducing holdings in largecaps. The new Emkay Model Portfolio (EMP)  will now follow a fixed 40/60 split, allocating 40 per cent to five selected SMID stocks and 60 per cent to large-cap stocks.

The SMIDs added include:

• Bikaji Foods – for its strong execution in one of the brighter areas within the consumer staples sector.
• Motilal Oswal – has a high-conviction play on capital markets.
• Shriram Pistons – a rare low P/E stock with rising earnings momentum and improving return ratios.
• Metropolis Healthcare – seen as a high-growth play with exceptional return ratios.
• Voltas – stock corrected due to a weak summer, despite being in the midst of a strong growth cycle.

Thematic stocks 

A subsection for thematic stocks has been created by the brokerage in its new model portfolio. Emkay will not trade stocks under this category for short-term trends – the only triggers for exit would be a structural change in fundamentals or better alternatives within the theme.

 

Key changes in this segment include:

• InterGlobe Aviation (IndiGo) – weight increased to 6 per cent, seen as a long-term beneficiary of India’s rising affluence and growing air travel demand.
• Eternal (Zomato) – weight raised to 8 per cent, as Emkay believes it is best placed to capitalise on the quick commerce boom.
• Dixon Technologies – allocation increased to 6 per cent, on the back of its exposure to the rapidly localising Indian electronics sector.

Sector basket additions

Discretionary is brokerage’s top sectoral choice with an “Overweight” stance as it sees a revival in consumption from H2FY26, led by monetary easing, a lower base, and tax cuts. This includes Internet and EMS in addition to Autos and auto ancillaries. The sector accounts for 15 per cent of the portfolio.

Healthcare now holds 7.4 per cent of the whole portfolio with the addition of Metropolis. However, this is split across pharma, hospitals, and diagnostics. The brokerage is “Overweight” on this sector, too. 

 

On the contrary, the brokerage has downgraded Technology to “Underweight”, citing stretched valuations and limited upside after the recent rally. Its “Underweight” stance on staples has been reduced due to the inclusion of Bikaji, though it continues to hold zero exposure to large-cap staples. Meanwhile, Industrials has been moved to “Overweight”, with IndiGo and Voltas representing the sector.

 

Additionally, Emkay has exited Tech Mahindra, Larsen & Toubro (L&T), Power Finance Corporation, Cholamandalam Investment, Tata Motors, and Page Industries.