Earnings growth slowing sharply in Q4
After five straight quarters of accelerating profit growth, the MOFSL coverage universe is expected to post just 10% PAT growth in Q4, down from 18% in Q3. Duggad has already cut FY26 earnings estimates for his full coverage universe by 1.5%, with midcap and smallcap earnings trimmed by 2% and 3% respectively. For FY27, the cuts are deeper at 3% for the broader universe and as much as 6% each for mid and smallcaps. Auto, cement, consumer durables, and EMS have seen the sharpest downgrades. Metals and oil and gas were the only sectors to escape FY26 cuts, though oil and gas has since seen bigger FY27 reductions.
Why midcaps continue to outrun the Nifty
Talking to ET Now, Duggad offered a clear structural explanation for why midcaps keep delivering stronger earnings than large caps. Around 60% of Nifty’s profit pool comes from BFSI, consumer, and IT, three sectors where the largest companies have been growing in mid to high single digits for two years. Reliance’s profits have been flat for three years. HUL’s profit has barely moved across 16 quarters. ITC is in the same boat. Even large IT firms are growing at just 7 to 8%. This structural drag means anyone expecting more than 12 to 14% Nifty earnings growth will likely be disappointed, while the broader market continues to compound faster.
SBI over HDFC Bank, PSU banks still the bet
MOFSL has been underweight on private banks for over two years and heavily overweight on PSU banks. In a striking move, Duggad has now equalised weights between HDFC Bank and SBI at 6% each in the model portfolio, the first time in the firm’s history. He sees SBI as deserving a further re-rating given attractive valuations, loan growth that beat every other bank last quarter, asset quality comparable to HDFC Bank and Axis Bank, and an upcoming mutual fund subsidiary listing that could unlock additional value.
Defence over core capital goods
Despite flagging the first earnings decline for capital goods in nearly five years, Duggad remains overweight on the sector. The reason is positioning. The portfolio is heavily tilted toward defence names, with Bharat Electronics already held and HAL freshly added at Rs 3,500 after a price correction. L&T is the only pure capital goods name retained.
Zero weight on FMCG, big bet on discretionary
MOFSL has carried zero allocation to FMCG staples since July 2025 and Duggad has no plans to change that. Instead, discretionary names are the preferred consumption play. Titan remains the top pick in this space, alongside Indian Hotels, IndiGo, Radico, and newly added Lenskart. On IT, the firm has gone back to underweight after a brief overweight phase, cutting Hexaware and Tech Mahindra and reallocating toward Infosys, Zomato, and Lenskart.
Capital markets: A decade-long bull run just getting started
Duggad is extremely bullish on India’s capital markets ecosystem over the next five to ten years. His recommended approach is to build a basket covering one broker, one exchange, one wealth manager, one AMC, and a couple of intermediaries. Groww, added at Rs 150 in November, has already rallied 35% and is still held. ICICI Prudential AMC has been freshly initiated. He acknowledges regulatory changes will keep coming but sees them as healthy course corrections rather than structural threats.
The big picture
Duggad’s overarching message is that portfolio construction must evolve. Staying anchored to traditional benchmarks, old-economy banks, legacy consumer names, and conventional IT will increasingly be a drag. The winners of the next cycle sit in discretionary consumption, capital markets, defence, and new-age platforms, and that is exactly where MOFSL is placing its chips.