Model Portfolio for FY27: Strategy, Sectors and Stock Positioning

The model portfolio framework for FY27 is built on a disciplined investment approach that prioritises growth visibility while maintaining valuation discipline.

At the core lies the Growth at Reasonable Price (GARP) strategy, which focuses on identifying mispriced growth opportunities. The approach avoids overvalued momentum trades while also steering clear of traditional value traps.

Rather than attempting to time broader market movements, the emphasis remains on bottom-up stock selection, with a clear focus on generating alpha. Historical data suggests that in any given year, only a handful of sectors and stocks outperform meaningfully, reinforcing the need for selective positioning, according to HDFC Securities Big Review report which was released on Wednesday.

Sectoral Cycles Highlight Importance of Rotation

A review of sectoral performance across years underscores the cyclical nature of market leadership.

Different sectors such as Metals (227 per cent in 2009), IT (166 per cent in 2009) and Realty (110 per cent in 2017) have delivered sharp outperformance in specific cycles, while also witnessing steep corrections in other periods.

For instance:

• Banks delivered 64 per cent in 2007 but declined 49 per cent in 2008
• Metals surged 139 per cent in 2007 but dropped 74 per cent in 2008
• IT saw a sharp -55 per cent correction in 2008 before rebounding strongly

This dispersion highlights the importance of identifying the right sector at the right phase rather than relying on static allocations.

Sector Outlook for FY27 Reflects Mixed but Selective Opportunities

The FY27 outlook indicates a balanced yet selective stance across sectors.

Neutral to Improving Segments

• BFSI remains neutral, with large banks better placed as margins improve, although credit costs and slower loan growth remain key monitorables
• IT & Exchanges show a neutral but improving bias, with cautious demand trends offset by emerging AI-driven deal opportunities
• Consumer Staples are expected to see gradual recovery supported by rural demand, though input cost pressures may persist

Positive Bias Segments

• Consumer Discretionary demand is expected to stabilise after bottoming out in FY26, although elevated valuations warrant selectivity
• Industrials and Infrastructure stand out with strong demand visibility driven by public capex and improving private investment cycles

Mixed and Cautious Segments

• Cement faces a negative outlook due to capacity expansion outpacing demand, pressuring utilisation and margins
• Chemicalsand Oil & Gas remain neutral with downside risks from input costs and global volatility
• Pharmacontinues to offer stable growth, though pricing pressure in US generics remains a constraint

Sector Allocation Reflects Tactical Overweights

Portfolio positioning reflects a combination of structural themes and tactical adjustments.

Overweight Areas

• Industrials & Infrastructure
• Real Estate
• Power
• Consumer Staples (incremental)

Neutral to Selective Exposure

• Consumer Discretionary
• IT & Exchanges

Underweight Segments

• Autos
• BFSI (incremental reduction)
• Metals
• Oil & Gas
• Pharma

This allocation indicates a tilt towards domestic growth and capex-led themes while maintaining caution on global cyclicals and margin-sensitive sectors.

Key Stock Picks Reflect Sectoral Conviction

The model portfolio includes a diversified set of stocks aligned with sectoral preferences.

Core Holdings by Sector

• Autos: Bajaj Auto, M&M, Bharat Forge, Hero MotoCorp, Samvardhana Motherson
• BFSI:ICICI Bank, Kotak Bank, SBI, Axis Bank, Bank of Maharashtra, MCX, SBI Life
• Consumer Staples: Marico, Godrej Consumer
• Consumer Discretionary: Crompton, Swiggy, Syrma SGS
• Industrials & Infrastructure: L&T, Cummins, NCC, Siemens Energy
• Real Estate:Sobha
• IT:Infosys, TCS, HCL Tech
• Energy:Reliance, ONGC, IOCL
• Metals:Jindal Steel, Tata Steel
• Power:NTPC, Power Grid
• Pharma:Aurobindo Pharma, Lupin

These selections reflect a mix of market leaders, structural growth plays and cyclical recovery candidates.

Research Performance Indicates Consistent Outperformance

Performance data across model portfolios highlights sustained alpha generation relative to benchmarks.

• HDFC Premium Basket (since Sept 4, 2025):
  Portfolio return at 2.3 per cent versus benchmark decline of -8.1 per cent, delivering 10.4 per cent relative outperformance
• HSIE Model Portfolio (since Feb 20, 2020):
  Portfolio return of 20.3 per cent compared to 15.0 per cent benchmark, with 5.3 per cent outperformance
• One 4 You Asset Allocation (since Sept 13, 2023):
  Portfolio return at 17.6 per cent versus 7.2 per cent benchmark, generating 10.4 per cent excess return
• 25 Expert Ideas (since April 17, 2025):
  Portfolio return of 11.8 per cent against benchmark decline of -4.5 per cent, implying 16.3 per cent outperformance

Strategy Anchored in Selectivity and Cycle Awareness

The FY27 model portfolio reflects a calibrated approach, combining valuation discipline, sector rotation and stock-specific conviction.

With markets transitioning towards an earnings-driven phase, the focus remains firmly on identifying sectors with improving visibility and companies capable of delivering consistent growth.

Rather than broad-based exposure, the strategy continues to emphasise selective allocation, disciplined execution and sustained alpha generation.

The Big Review report was released by HDFC Securities Ltd MD & CEO, Dhiraj Relli, along with Chief Research Officer – Equities, Varun Lohchab, Head of Institutional Equities, Unmesh Sharma and Head of Prime Research, Devarsh Vakil.