As geopolitical tensions between Iran, Israel, and the US continue to rattle global markets, Kotak Institutional Equities has recalibrated its model portfolio. The brokerage has made a high-conviction swap: removing FMCG giant ITC and adding state-run energy leader ONGC.
This move signals a pivot from “resilient” stocks toward “high-recovery” assets that have been oversold during the recent correction.
The Case for ONGC: High Upside & Policy Clarity
Kotak has added ONGC with a 150-basis-point weight, setting a 12-month fair value of ₹375. The rationale is built on three pillars:
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Massive Valuation Gap: ONGC is trading at just 4.8x FY27E earnings. This is remarkably low compared to the broader market, offering a “safety margin” for investors.
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Superior Upside: While most stocks are struggling, Kotak projects a 30% upside for ONGC, driven by stable crude prices (estimated at $85/bbl for FY27).
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Policy Tailwinds: Recent amendments to the ORDA Act and the government’s stable pricing actions during the Middle East conflict have eased previous concerns about state intervention in PSU oil companies.
The Exit of ITC: A Victim of Its Own Resilience
Surprisingly, ITC was removed not because of poor performance, but because it held up too well.
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Relative Value: Because ITC’s share price didn’t fall as sharply as others during the recent 8–10% market correction, its projected upside is now capped at 16%.
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The “Better Bargain” Logic: Kotak believes that in a “battered” market, capital is better deployed in stocks that saw deeper price cuts and now offer a more attractive reward-risk balance.
Kotak’s Market Philosophy: Avoiding the “Hypnosis”
The brokerage warned that investors are currently “hypnotized” by the negative news cycle, assuming the current geopolitical gloom will last forever. Kotak’s strategy is to ignore the noise and focus on the valuation reset:
“Calling the exact bottom is impossible, but the sharp correction has opened up better opportunities in parts of the market that saw deeper price cuts.”
| Stock | Action | Fair Value | Estimated Upside | FY27E P/E |
| ONGC | Added | ₹375 | ~30% | 4.8x |
| ITC | Removed | ₹338 | ~16% | Higher |
The Bottom Line
Kotak is shifting from defensive stability (ITC) to aggressive value (ONGC). By betting on the energy sector, they are positioning for a scenario where energy remains a global focal point while taking advantage of the steep valuation discounts currently available in the PSU space.
