Stocks with strong EPS upgrades in past 3 months; Emkay views on IT, financial stocks - Stocks with strong EPS upgrades in past 3 months; Emkay views on IT, financial stocks BusinessToday (2025)

In its latest strategy note, Emkay Global Financial Services said the domestic stock marketsaw a sharp rally following the temporary easing of geopolitical tensions, with financial stocks taking the lead. The brokerage, however, cautioned that India remains vulnerable to tariff-related risks, despite expectations that any eventual resolution will be less severe than the April 2 announcements.

Looking ahead, Emkay identified two critical drivers for the equity market: the pace of bilateral trade agreements by the United States—particularly those involving China—and the earnings momentum of Indian companies. It estimates that the downside risk to the Nifty’s FY26 EPS is relatively moderate, at around 2–3 per cent.

The domestic brokerage shared its views on bank and IT stocks, and also screeners on what it called momentum and value stocks.

Financial stocks
In the case of banks and NBFCs, Emkay Global said lenders are enjoying strong regulatory tailwinds – improved liquidity and easing of lending norms. These benefits are likely to peter out soon, though, especially as large banks face strong margin pressure due to rate cuts being deeper than originally forecast.

"The longer-term challenges for banks persist – overall growth remains below the RoE, thus leading to weak BVPS; pockets of excess RoA/RoE continue to be competed away, and fintechs slowly chipping the franchise strengths of incumbents. These are not fully captured in the valuations, despite the severe P/B derating for private banks. We remain UW and prefer playing the rate cycle via autos and the larger consumer discretionary universe," it said.

IT stocks
Despite weak Q4 results from tech companies, Emkay Global has retained its 'Overweight' view on the sector, saying historical trends showed that the IT Index has always rallied when the sector PE reaches such lows and that the stocks rally well, ahead of earnings upgrades.

"The current slowdown is a cyclical one, and we see an upgrade cycle toward the end of CY25, once clarity emerges around tariffs. The underlying imperatives for clients to ratchet up tech spending are compelling, so a down-cycle may not last for long in our view. This is a good time to enter a high-quality sector (strong cash flows, return ratios, and governance) at reasonable valuations," it said.

Momentum stocks
Emkay Global filtered stocks with an over 5 per cent FY26 EPS upgrade in the last 3 months. Top Ideas included Varun Beverages Ltd, ICICI Prudential Life Insurance, and Anant Raj from Emkay coverage, and also Mazagon Dock Shipbuilders, Arvind SmartSpaces, and ABB.

It also looked at changes in the Bloomberg consensus rating in the last three months, with Techno Electric and Godrej Consumer Products among stocks in the Emkay universe, and Mazagon Dock and ABB in the 5-plus analyst coverage emerging as key ideas.

Value stocks
"We also ran a value screen, with FY26E ROCE at more than 30 per cent premium to the 3-year average, and price correcting by more than 35 per cent from a 52-week high (minimum FY26E ROCE: 12 per cent). Key Ideas from Emkay Coverage: Genus Power, Anant Raj, and Go Fashion; and Engineers India, Symphony, and Trent from the consensus universe," the domestic brokerage said.