BFSI, telecom, healthcare: Ideal portfolio for a volatile stock market

Kotak has added ABB to the recommended model portfolio after the 36 per cent correction in the past six months. Its valuations, the brokerage said, look reasonable at 54X FY2026E EPS

The imposition of high and varied import tariffs by the US on its major trading partners, the different responses by other countries so far, and the sharp sell-off in global markets has created large uncertainties about the Indian market, analysts at Kotak Institutional Equities (KIE) said. Going forward, the response of countries to the US’ reciprocal tariffs and the behavior of investors will determine the course over the next few weeks. 

The performance of the Indian stock market in the coming weeks, they said, will depend on the response of various countries to the US' reciprocal tariffs in the form of reconciliation or retaliation (China), the behavior of retail and institutional investors, and the performance of other markets in a volatile setting.

 

 

"The Indian market has held up better so far, based on investors’ denial of the increased geopolitical, global and domestic macroeconomic, and sector-specific risks, faith in a reversal in the tariff and trade policies of the US, and belief that India is relatively better off in the ‘reciprocal’ regime," Sanjeev Prasad, Anindya Bhowmik, and Sunita Baldawa of KIE said.

  Against this, they remain upbeat on the Banking, Financial Services, and Insurance (BFSI) sector, citing reasonable valuations amidst the ongoing volatility in the stock markets. The analysts also prefer healthcare services and pharmaceuticals, describing them as defensive, especially the healthcare services and domestic pharmaceutical companies, as well as the telecom sector, calling them classic defensive sectors.

 

In a research note, analysts at KIE recommended adding ABB (150 bps) to the model portfolio after a 36 per cent correction in the past six months. Its valuations, they said, look reasonable at 54X FY2026E EPS.

 

"We see ABB as relatively insulated from our expected slowdown in government and household capex and muted private capex. We expect continued strong progress in the electrification of the economy and manufacturing. ABB is well-positioned in both of these fast-growing sectors," wrote the analysts. 

 

On the flipside, they have reduced their weight in Mahindra & Mahindra (M&M) from and in Sun Pharmaceutical Industries (SUNP).

 

"We do not find value in most parts of the market. The Indian market and most sectors and stocks continue to trade at rich valuations. In addition, we note increased downside risks to earnings. Our earnings estimates may turn out to be optimistic, given the changed situation and the high probability of a synchronised global slowdown (or even a global recession) unless the tariff issue is resolved amicably in the next few months," wrote the analysts in their research note.  Also Read: Stock market crash 2025: What's different from the past market meltdowns?

 

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That said, analysts believe that it would be too early to take a call on any structural changes in global trading patterns and on winners and losers based on reciprocal tariffs alone. A lot will depend on the response of countries. "A section of the Street may want to believe that India could benefit from global supply chains moving to India due to a relatively lower tariff on India."

 

Analysts, however, cautioned against this, noting the complexity of global supply chains, the dilemma companies face in making decisions in a very fluid environment, and the response of countries to retain manufacturing through appropriate trade deals with the US.