In a major signal of conviction, Motilal Oswal’s model portfolio now carries zero allocation to consumer staples. “All our consumption allocation in the model portfolio now resides in discretionary,” he stated. Titan remains a top pick in this space, even though its growth this quarter was slightly below that of smaller jewellery players. “Titan’s 18% is very respectable on that size,” Duggad said, highlighting that it remains five to six times larger than most peers and is well-positioned to benefit from the sector’s shift from unorganised to organised players.
However, not all marquee names have made the cut. Duggad revealed that Trent has been tactically removed from the portfolio and replaced by Jubilant FoodWorks. “At triple-digit PE, there’s no room for error,” he remarked, citing lower-than-expected store additions and growth tapering to 20%. Jubilant, on the other hand, benefits from a favourable base, urban revival, and a strong balance sheet. “We chose the best one that we thought,” he added.
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Another bold move was increasing midcap exposure for the first time in years. “Midcap earnings are outperforming largecaps by 2x,” Duggad said. The portfolio’s largecap allocation was reduced from 76% to 69%, making room for additions like Radico Khaitan, Dixon Technologies India, Kaynes Technology India, UTI Asset Management Company, Macrotech Developers, and Niva Bupa Health Insurance Company. He pointed out that Dixon and Kaynes “have benchmark zero allocation in indices,” giving them room to surprise.
FY26 is shaping up to be a stronger year for earnings after a flat 2024-25 (FY25). “We are building in 11–12% earnings growth,” said Duggad, driven by supportive macro factors like policy easing, tax cuts, and a favourable monsoon. For Q1FY26, Duggad expects 10% earnings growth in the Motilal Oswal coverage universe and 5% for the Nifty. That number is set to improve as the year progresses.
On sector bets, cement and electronic manufacturing services (EMS) are standout favourites. “We expect 30% earnings before interest, taxes, depreciation and amortisation (EBITDA) growth in cement,” he said, adding that “EMS will continue to see 50–60% earnings growth,” which remains rare in the current macro. He believes that with nominal GDP likely to stabilise at 9–10%, it will be hard for the market to sustain much above 12–13% earnings growth, making bottom-up stock picking even more critical.
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The auto sector has also been upgraded from underweight to equal weight. Duggad said, “Valuations are still reasonable, expectations are modest,” and macro tailwinds suggest a pickup in the coming quarters. The model portfolio retains Mahindra and Mahindra (M&M) and TVS Motor Company as top bets, with Craftsman Automation and Endurance Technologies among the preferred ancillaries.
Defence remains another key theme, though valuations are a concern after a sharp run. “We continue to like it,” Duggad said, pointing to Bharat Electronics and Hindustan Aeronautics (HAL) as strong names. However, he cautioned, “One has to be patient and shouldn’t expect a quick buck here.” While prices have surged, he believes the opportunity is still intact for investors with a one- to three-year view.
For the entire interview, watch the accompanying video
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