Duggad: Midcaps to Beat Nifty, Q4 PAT Growth Halves
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- MOFSL coverage universe Q4 PAT growth is expected to halve to 10% from 18% in Q3, ending five straight quarters of acceleration, with FY26 estimates cut 1.5% for the broad universe, 2% for midcaps, and 3% for smallcaps
- Gautam Duggad has cut FY27 earnings estimates even deeper: 3% for the broader universe and 6% each for midcaps and smallcaps, with auto, cement, consumer durables, and EMS absorbing the sharpest downgrades
- Midcaps' structural edge is explained by 60% of the Nifty's profit pool sitting in BFSI, consumer, and IT, where Reliance has been flat for three years, HUL unchanged across 16 quarters, ITC stuck in neutral, and large IT firms growing just 7-8%
- HDFC Bank and SBI are now equal-weighted at 6% each in MOFSL's model portfolio, the first time in the firm's history, with SBI flagged for further re-rating on valuation, loan growth, asset quality, and an upcoming mutual fund subsidiary listing
- Capital goods is seeing its first earnings decline in nearly five years, yet the portfolio stays overweight by tilting heavily into defence: Bharat Electronics held and HAL freshly added at Rs 3,500 after a correction, with L&T the only pure capital goods name retained
- FMCG has carried zero allocation since July 2025, with discretionary names preferred: Titan as the top pick alongside Indian Hotels, IndiGo, Radico, and newly added Lenskart, while IT is back to underweight after Hexaware and Tech Mahindra were cut
- Capital markets get a five-to-ten-year super-cycle call, with a recommended basket of one broker, one exchange, one wealth manager, one AMC, and intermediaries: Groww, bought at Rs 150 in November, is already up 35%, and ICICI Prudential AMC has been freshly initiated
Why it matters: Investors anchored to the Nifty's heavyweights face structural drag: 60% of its profit pool is stuck in BFSI, consumer, and IT, where Reliance has been flat three years and HUL unchanged for 16 quarters. Duggad is rotating into midcaps, defence, discretionary consumption, and capital markets platforms, with FY27 EPS estimates slashed 6% for mid and smallcaps.
