Nuvama has turned more defensive on Indian equities, arguing that the market’s next challenge is likely to come from weakening demand rather than supply-side shocks. In its latest strategy note, the brokerage said easing geo-political tension and lower oil pricescould reduce supply pressures, but fading tax-cut benefits, weak income growth, slowing capex and El Niño risks could weigh on earnings.
Against that backdrop, Nuvama is Overweight on consumer, IT, private banks, pharma, cement and chemicals, while staying underweight on industrials, metals, autos and power.Nuvama has built overweight positions in a clutch of large cap and midcap names it believes can hold up better if demand softens, including ICICI Bank, Sun Pharma, Tech Mainstay, Grasim Industries, Nestle India, Shriram Finance, Eicher, Indigo, Pidilite Industries, Havells India and others.
The portfolio also carries explicit stock and sector weights versus the Nifty, making the note a positioning guide rather than just a broad strategy call.
“We remain Overweight Consumer, IT, private banks, Pharma, Cement and Chemicals; and Underweight Industrials, Metals, Autos and Power,” Nuvama said.
Why is Nuvama getting more defensive
Nuvama said the risk to earnings is moving from supply to demand side. The brokerage said India Inc. saw a rebound in top-line growth in the second half of FY26, helped by GST cuts, RBI easing, a weak rupee and the AI-linked commodity cycle, but added that the quality of that recovery was not strong enough to justify current FY27 expectations.
According to the report, household incomes remain weak, wage growth is subdued and rural demand could come under pressure if El Niño disrupts the monsoon. Corporate capex is also losing momentum as cash flows weaken and working-capital pressure rises, while government finances remain stretched by softer tax revenues and a higher subsidy burden. Nuvama said that combination could keep earnings downgrades coming and make current market valuations harder to defend in cyclical pockets.
That macro call has shaped the portfolio. Nuvama said it now prefers high-dividend sectors, exporters that benefit from an undervalued rupee, and businesses with steadier earnings profiles, while trimming exposure to expensive cyclicals whose valuations were inflated by the recent supply shock and AI-led commodity optimism.
ICICI Bank, Shriram Finance and Max Financial anchor the BFSI basket
Private financials are one of Nuvama’s preferred pockets in the new setup. The brokerage said private banks are trading at bottom-cycle valuations even as liquidity conditions begin to improve, which could support sentiment and re-rating. It contrasted that with metals, which it said are trading at a premium to private banks despite being far more cyclical.
Within the model portfolio, ICICI bank Ltd is one of the key largecap positions. Shriram Finance and Max Financial Services also feature among Nuvama’s preferred financial names. At the sector level, Nuvama is overweight private banks, while its broader stance within financials favours better quality franchises over more cyclical lenders.
Sun Pharma, Nestle, Tech Mahindra and Pidilite in Nuvama’s top picks
Pharma, consumer and IT are other clear beneficiaries of Nuvama’s repositioning. In pharma, Sun Pharma is one of the brokerage’s preferred large cap ideas, while the model portfolio also includes Torrent Pharma and Dr Reddy’s. Nuvama’s case is that pharma offers more resilient earnings and lower sensitivity to a domestic demand slowdown than cyclical sectors.
Consumer names also feature prominently. Nuvama’s preferred list includes Nestle India, Pidilite Industries, Havells India, Page Industries and InterGlobe Aviation. These are not all classic staple names, but Nuvama’s common thread is clear: it wants businesses with stronger cash generation, better earnings visibility and less exposure to a broad demand slowdown.
IT is another area where the brokerage sees value after a prolonged de-rating. Nuvama said Indian industrials now trade at an unusual premium to IT on price-to-sales despite similar revenue growth, which it sees as hard to justify. Tech Mahindra is among its top picks, while Infosys, LTIMindtree and TCS also sit in the model portfolio. Nuvama’s argument is that IT offers stronger cash-flow profiles and unusually high dividend yields at a time when the market is still paying up for cyclical sectors with weaker visibility.
Nuvama Overweight on Grasim, Ambuja and JK Cement
Cement is one of the cleanest examples of how Nuvama has translated its macro view into portfolio weights. The brokerage has assigned the cement basket a 5.3% portfolio weight against a 2.3% weight in the Nifty, implying a 300 basis point overweight.
Within that basket, Grasim Industries carries a 3.1% portfolio weight versus a 1.1% Nifty weight, which translates into a 200 basis point overweight. Ambuja Cements has a 1.2% portfolio weight against a zero Nifty weight, while JK Cement has a 1% portfolio weight against a zero Nifty weight.
Nuvama said the cement industry’s microstructure is improving as companies move away from chasing volumes and focus more on profitability. It also noted that cement capex growth has slowed after several years of heavy expansion, while sector profitability remains near weak levels, leaving room for recovery if cost pressures ease. That is the backdrop for its positive stance on Grasim, Ambuja and JK Cement.
Chemicals also get a larger weight, with Coromandel and Aarti among the picks
Nuvama is also overweight chemicals, arguing that a more competitive rupee relative to the Chinese yuan, easing cost pressure and the potential for operating leverage improve the setup for the sector. Coromandel International and Aarti Industries are among its preferred names, while Navin Fluorine also appears in the broader model portfolio.
The report links this call to both macro and stock-specific factors. On the macro side, Nuvama sees the weaker rupee as a support for exporters. At the company level, it expects selected chemical names to benefit from better spreads and a lower-cost base if supply-side pressure keeps easing.
Industrials, metals, autos and power are where Nuvama is cutting exposure
The flip side of the strategy is a more cautious stance on sectors that have been market favourites. Nuvama is underweight industrials, metals, autos and power, arguing that these segments still trade at rich valuations even as the macro setup turns less supportive.
On industrials, Nuvama said the sector’s re-rating has overshot fundamentals. It pointed out that industrial companies now trade at a premium to IT on price-to-sales even though revenue growth has moderated to a similar 10-12% range and earnings estimates have been cut over the past year. It also flagged weakening order inflows across industrial names, especially in power equipment, as a sign that expectations may have run ahead of reality.
The brokerage is similarly cautious on metals, saying valuations are close to past peak levels even though return ratios are much lower than in earlier cycles. In power, it argued that the sector’s re-rating has gone too far relative to defensives, especially with growth now looking broadly similar across both sets of businesses. Autos are also underweight because Nuvama expects the recent boost from GST cuts to fade while household income weakness could begin to show up more clearly in discretionary demand.
The portfolio is tilted toward earnings resilience
The broader takeaway from Nuvama’s note is that it is no longer treating lower oil prices as a clean risk-on trigger for Indian equities. Instead, it sees a market where the headline index could stay range-bound, earnings downgrades may continue, and stock selection will do more of the heavy lifting than broad market exposure.
The large cap basket includes ICICI Bank, Sun Pharma, Nestle India, Shriram Finance, Grasim Industries, Eicher Motors, InterGlobe Aviation, Pidilite Industries and Tech Mahindra.
The mid- and small cap side adds Havells India, Coromandel International, Max Financial Services, Page Industries, Balkrishna Industries, JK Cement, Container Corporation, PG Electroplast, Aarti Industries and Gravita India.
Report by Shivangini Gupta of Financial Express
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