HDFC Securities shares 25-stock model portfolio for long term, says FPI selling near its end

The Foreign Portfolio Investor (FPI) flows, which had been a concern during FY25 seem to be reaching a turning point, HDFC Securities said.

Brokerage firm HDFC Securities has released a list of 25 stock recommendations for long-term investors seeking a balance between growth and diversification over a three-to-five year horizon.

The report titled ‘25 Transformative Investment Ideas’ features 13 largecap and 12 mid and smallcap companies.

Among largecap names, HDFC Securities has suggested names like Reliance Industries, State Bank of India, Larsen and Toubro, Maruti Suzuki, NTPC, Powergrid Corporation, Avenue Supermarts (DMart), Eternal, Chola Finance, United Spirits, Torrent Pharma, Apollo Hospitals and Marico.

From the Small and Midcap space, the note has suggested ICICI Lombard, InfoEdge, Samvardhana Motherson, Jindal Steel and Power, Cummins India, Prestige Estate, MCX India, Amber Enterprises, Navin Flourine, Century Plyboard, Sobha and JK Lakshmi Cement.

Varun Lohchab, Head of Institutional Research at HDFC Securities said investors typically are either overly-concentrated in a few stocks, thus significantly raising risk, or scattered across 100 names based on varied recommendations, which dilutes potential upside. This portfolio addresses both concerns, he added.

The ‘model portfolio’ has allocated around 20 percent to consumer businesses, about 16 percent to BFSI, and the rest is spread across infrastructure, manufacturing, digital, and renewable energy. Lohchab said the earnings growth forecast for the basket stands at around 31 percent CAGR - almost three times the current estimate for the Nifty. “These are growth turbocharged companies. You are paying a higher multiple of around 35 times earnings compared to Nifty’s 20x but the growth you're getting is 2.5-3 times more. That makes the P/E ratio significantly better than the overall market," he explained. The portfolio covers themes playing out, from infrastructure expansion and manufacturing shifts to digital adoption and clean energy.

Beyond sectoral leaders, the basket has midcap companies with strong growth potential such as Shobha Developers, MCX, Naveen Fluorine, and Century Ply, where HDFC Securities sees very high earnings momentum. Lohchab said for largecap names, they have viewed companies from a strong valuation perspective. “Some names like Reliance, SBI, and L&T have become more attractive after periods of underperformance,” he said.

The brokerage said this portfolio is meant for investors willing to stay invested for at least 3-5 years. “Not all our investors are looking for a one-year trade. If you want to benefit from compounding, a three to five-year horizon is the minimum you should aim for. This basket has been built with that philosophy in mind—strong businesses, aligned with India’s future, and poised for sustained growth,” he explained.

Economy Resilient Despite Risks

At the launch of the report during an event to celebrate 25 years of HDFC Securities, Dhiraj Relli, MD, HDFC Securities said that despite ongoing geopolitical tensions and recent market volatility, the house is optimistic about India’s medium to longer term economic prospects. While acknowledging the possibility of short-term disruptions, Relli said the fundamentals of Indian economy continue to remain resilient and supportive of growth.

The Foreign Portfolio Investor (FPI) flows, which had been a concern during FY25 seem to be reaching a turning point. “Historically, barring the 2008 Global Financial Crisis, FPIs have not sold at this quantum for more than two consecutive quarters. Based on that analysis, we believe we are at the back-end of the FPI selling cycle,” Lohchab said. He added, “Sticky long-term FPI money continues to remain invested in India, with no change in sentiment. But the more tactical, short-term capital may still remain cautious, especially as other markets offer attractive relative valuations.”

Looking ahead to FY26, both Relli and Lohchab said the overall macroeconomic environment, earnings trajectory, valuation landscape and capital flows are improving at the margin. While none of them are strong enough to warrant an entirely bullish stance, there is equally no reason to be bearish, HDFC Securities said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.