Iran War: L&T, Tata Steel, HAL, Amber, BEL, UltraTech, MTAR among PCs top stock picks

Phillip Capital believes that Indian stock markets continue to display resilience and remain constructive on equities despite prevailing geopolitical uncertainties and global realignments. The brokerage notes that recent shifts in investor allocations are likely to continue as the impact of global events unfolds and clarity emerges for asset classes and market participants.

Highlighting structural optimism, Phillip Capital states, "We believe the AI shift is real and its impact on valuations could be swift, while earnings impact could take a while to show." The report further notes that India’s advantage lies in its robust domestic economic growth amid an uncertain global environment.

Phillip Capital remains upbeat on the Indian economy and equity outlook, citing a favourable policy landscape and macroeconomic tailwinds. "We remain optimistic on the Indian economy and equities, buoyed by incremental positives such as trade deals, lower taxes and interest rates, higher earnings, supportive government policies, new set of reforms, and an improved global standing," it said.

Geopolitical tensions, particularly the ongoing US-Israel and Iran conflict, are identified as a short-term overhang on Indian equities due to risks of higher oil prices and energy supply constraints. "Thus, we believe, equity correction is an opportunity to buy, assuming normalisation will resume in the Middle-East, even if the war is prolonged," said the brokerage firm.

Phillip Capital expects India’s GDP growth in FY27-28 to reach 7.5 per cent, supported by broad-based strength across all four economic pillars. The report also anticipates inflation edging higher in FY27 due to an unfavourable base, with policy rates likely to remain unchanged.

Bond yields are forecast to stay elevated due to high bond supply from the centre and states. On the external front, Phillip Capital predicts a substantial improvement in BoP surplus in FY27, led by exports and capital flows, with tariffs unchanged.

Currency risks are seen to be abating, with the brokerage adding, "With much of the USD-INR depreciation played out, we expect greater stability ahead." Nifty’s earnings are projected to grow by 5 per cent in FY26, 17 per cent in FY27, and 14 per cent in FY28. Phillip Capital has set a Nifty target of 26,500-27,500 by March 2027.

For portfolio construction, PC emphasised mid-large caps and quality small caps: "Earnings (under PC coverage) in FY26/27/28 should rise by 12-13 per cent. We prefer mid & large caps and select quality small caps based on valuations and earnings," it adding citing capital goods, defense, metals, autos, and cement, with incremental positivity on banks and FMCG as. key sectors.

Phillip Capital has adjusted its model portfolio, raising weights in capital goods, defense, banks, and staples, while reducing weights in autos, IT, oil & gas, and pharma. It estimates India’s GDP growth at 7.2-7.7 per cent in FY27 and CPI inflation at 3.7-4.2 per cent, while seeing India’s 10-year bond yield in the 6.4-6.9 per cent range and CAD remaining muted under 1 per cent of GDP.

Looking ahead, Phillip Capital advises that Indian equities may see tepid near-term returns but offer attractive long-term value. Nifty is currently trading at a forward P/E of 19.2/16.6 times, with strategies such as churning and buy-on-dips expected to aid alpha generation.

Phillip Capital has cited Larsen & Toubro (L&T), Schneider Electric Infrastructure, Hindustan Aeronautics (HAL), Bharat Electronics (BEL), JK Cement, Ultratech Cement, Amber Enterprises India, MTAR Technologies, Coforge, Hindalco Industries, Tata Steel, Axis Bank, Titan Company, Ashok Leyland, Lumax Auto as its top picks.