HDFC Securities Reveals 25-Stock Long-Term Portfolio, Anticipates End of FPI Selling

HDFC Securities Unveils Long-Term Investment Strategy

HDFC Securities has released its model portfolio aimed at long-term investors who seek growth and diversification over a three-to-five-year horizon. The report, titled ‘25 Transformative Investment Ideas,’ features 25 stock recommendations, divided into 13 large-cap and 12 mid and small-cap companies. The portfolio provides a balanced approach, blending high-growth potential with risk mitigation, and aims to cater to investors looking for a stable yet rewarding investment strategy.

Highlights:

• 25 stock recommendations for a 3-5 year investment horizon.

• Portfolio includes 13 large-cap and 12 mid/small-cap companies.

Key Allocations in the Model Portfolio

The model portfolio is strategically diversified across various sectors, with around 20% allocated to consumer businesses, 16% to the BFSI (Banking, Financial Services, and Insurance) sector, and the remaining portion distributed among infrastructure, manufacturing, digital, and renewable energy. According to Varun Lohchab, Head of Institutional Research at HDFC Securities, the earnings growth forecast for this portfolio stands at around 31% CAGR, which is almost three times the current estimate for the Nifty index. This forecast demonstrates the strong growth potential of the selected companies, which are expected to perform well in a dynamic economic environment.

Highlights:

• 20% allocation to consumer businesses, 16% to BFSI, and the rest across diverse sectors.

• Portfolio expected to deliver 31% CAGR in earnings growth, outpacing Nifty’s growth.

Strong Large-Cap and Mid/Small-Cap Selections

The portfolio includes well-established large-cap companies such as Reliance Industries, State Bank of India, Larsen and Toubro, Maruti Suzuki, NTPC, Powergrid Corporation, Avenue Supermarts (DMart), and Apollo Hospitals, among others. These companies are seen as market leaders with solid growth potential, especially after periods of underperformance, which have made them more attractive from a valuation standpoint.

On the mid and small-cap front, the portfolio features companies like ICICI Lombard, InfoEdge, Samvardhana Motherson, Jindal Steel and Power, and Cummins India, among others. These stocks are considered to have high growth momentum, driven by their strong earnings potential in the coming years. The portfolio is designed to offer diversification, with a mix of stable large-caps and high-potential mid/small-cap stocks.

Highlights:

• Large-cap names like Reliance, SBI, and L&T are included for their strong market position and improved valuations.

• Mid/small-cap stocks like ICICI Lombard and InfoEdge show high growth momentum.

Portfolio Approach: Growth Turbocharged Companies

Lohchab explains that the companies in the portfolio are “growth turbocharged,” meaning they are expected to deliver earnings growth at a much higher rate than the overall market. While these companies are trading at higher price-to-earnings (P/E) multiples compared to the Nifty (around 35 times earnings versus Nifty’s 20x), their growth potential makes them more attractive from an investment perspective. The portfolio reflects key trends in the economy, such as infrastructure expansion, the shift in manufacturing, digital adoption, and the transition to clean energy.

Highlights:

• Portfolio stocks are expected to deliver growth 2.5-3 times higher than the market average.

• The portfolio reflects key trends like infrastructure development and clean energy.

Addressing Investor Concerns: Risk and Diversification

According to Lohchab, many investors face the dilemma of either being overly concentrated in a few stocks, which raises risk, or being spread too thin across too many names, which dilutes potential upside. This model portfolio is designed to strike a balance by selecting a mix of high-growth, stable businesses while ensuring adequate diversification. The focus is on sustainable growth with a view towards long-term compounding.

Highlights:

• The portfolio strikes a balance between growth and diversification.

• Designed to minimize risk while maximizing long-term potential.

FPI Selling Reaches Turning Point

HDFC Securities also addressed concerns regarding Foreign Portfolio Investor (FPI) flows, which had been a point of worry during FY25. The brokerage firm believes that FPI selling is nearing its end. Historically, FPI selling has not occurred at such a high volume for more than two consecutive quarters, except during the 2008 Global Financial Crisis. Based on this analysis, HDFC Securities predicts that the FPI selling cycle is likely to come to a close soon, with long-term FPI money remaining invested in India despite short-term caution due to other markets offering relatively attractive valuations.

Highlights:

• FPI selling is nearing its end, according to HDFC Securities.

• Long-term FPI investments in India remain stable, despite short-term market fluctuations.

Optimism for India’s Economic Outlook

During the launch event for the report, Dhiraj Relli, MD of HDFC Securities, expressed optimism about India’s economic prospects, despite ongoing geopolitical tensions and recent market volatility. Relli acknowledged the possibility of short-term disruptions but emphasized that the fundamentals of the Indian economy remain resilient and supportive of growth. Both Relli and Lohchab noted that macroeconomic indicators, earnings growth, valuations, and capital flows are gradually improving, although not strong enough to warrant a completely bullish stance.

Highlights:

• HDFC Securities remains optimistic about India’s long-term economic prospects.

• Despite short-term volatility, the fundamentals support growth in the medium term.