JM Financial stays overweight on banks, realty, defence in India Model Portfolio

JM Financial leans into banks, infra, NBFCs; cautious on internet, pharma, consumer

In its latest India Model Portfolio, JM Financial has taken an overweight stance on sectors such as banks, real estate, REITs & hotels, telecom, infrastructure, defence, oil & gas, NBFCs & AMCs, insurance, and metals. On the flip side, the brokerage remained underweight on internet-based businesses, utilities, cement, pharmaceuticals, and consumer sectors.

The firm anticipates loan growth to improve to 13% in FY26, aided by the unwinding of risk weights on bank lending to NBFCs and a potential uptick in unsecured lending beginning in Q3FY26. However, the estimate is capped at 13% due to continued weakness in corporate credit demand.

The brokerage is overweight on NBFCs as the anticipated interest rate cut was forecasted to benefit NBFCs and mid-sized banks, but the benefit to NBFCs and mid-sized banks was limited as asset end got re-priced downwards much faster than benefits from the cost of funds coming through.

JM Financial is particularly bullish on NBFCs, which were expected to benefit from an upcoming rate cut. But those gains were muted, as asset-side repricing happened faster than the pass-through of reduced funding costs, limiting margin improvement for NBFCs and mid-sized banks.

In the insurance segment, the brokerage expects 12–13% premium growth in FY26, although the first half of the fiscal year is likely to remain sluggish. Nevertheless, margin expansion is anticipated as higher-yielding fixed income products see increased traction.

From a valuation standpoint, midcaps appear the priciest on a FY26E P/E basis, with the Nifty Midcap 100 trading at 29.3x, followed by small caps at 25.2x, and large caps at a more modest 20.6x.

However, when assessed using the FY26E PEG ratio, the narrative flips: midcaps emerge as the cheapest (1.3x), followed by small caps (1.7x), while large caps turn out to be the most expensive (1.9x), the report noted.

JM analysts also highlighted that EPS downgrades in April were notably steeper than those seen in February, suggesting that the recent earnings season may have driven the downward revisions.

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