Nomura Recommends 27 Stocks for Long-Term Gains Despite Muted Q1 and US Tariff Worries

Japanese brokerage Nomura has released its latest India equity strategy, maintaining a positive outlook despite muted Q1 earnings and the potential downside risks from US tariffs and sector-specific headwinds. The brokerage has identified 27 most preferred stocks across sectors, providing a detailed rationale for each recommendation.

Nomura has picked four stocks from the financial sector, including ICICI Bank, State Bank of India (SBI), Axis Bank, and HDFC AMC. The brokerage believes that system liquidity conditions will ease with measures taken by the Reserve Bank of India (RBI) to ensure adequate liquidity. Valuations in this sector remain attractive, and the long-term prospects of Asset Management Companies (AMCs) are strong, driven by growth in Systematic Investment Plans (SIPs) and new product avenues.

In the consumer and FMCG sectors, Nomura has identified four stocks: Marico, Godrej Consumer Products (GCPL), Tata Consumer Products, and Dixon Technologies. The brokerage notes a gradual recovery in volume growth, driven by an uptick in rural demand and some green shoots in urban demand. Price hikes are expected to have a limited impact, and most sales growth will be volume-led. Electronic Manufacturing Services (EMS) are also expected to see strong growth, driven by new clients, export upticks, and component manufacturing.

Nomura is positive on the auto sector and has listed Mahindra & Mahindra (M&M), Uno Minda, and Ather Energy as its most preferred picks. Most Original Equipment Manufacturers (OEs) are primarily exposed to the domestic market with limited export exposure, which means the impact of US tariffs is expected to be minimal.

For the infrastructure sector, Nomura remains cautious but picks Larsen & Toubro (L&T) as the only stock to buy. The sector provides earnings visibility due to a strong order backlog. L&T's total ordering prospects over the remaining 9MFY26 stand at Rs 14.8 trillion, up 64% year-over-year.

Nomura remains positive in the cement and real estate sectors, with UltraTech Cement and Lodha Developers as its picks. The brokerage prefers UltraTech for its sustainable cost-saving measures, while Lodha is expected to benefit from a gain in market share by Grade A developers.

In the capital goods and defense sectors, Nomura remains cautious but prefers CG Power and Industrial Solutions, GE Vernova T&D India, and Hindustan Aeronautics (HAL). The brokerage remains selective, favoring stocks with diversified earnings growth levers.

Nomura's only pick in the IT services sector is Infosys. The brokerage believes that rising macroeconomic risks in the US due to Trump's tariff policy will weigh on decision-making and discretionary demand for IT services. Companies with better growth visibility are expected to perform well.

In the oil and gas sector, Nomura's most preferred picks are Reliance Industries (RIL), Bharat Petroleum Corporation (BPCL), and Mahanagar Gas (MGL). The brokerage expects oil prices to remain range-bound between $65-70 per barrel, with healthy refining margins in CY25F. City Gas Distributors (CGDs) are expected to do well despite a cut in APM allocation, thanks to a benign imported LNG price outlook and robust volume growth.

Finally, in the pharmaceutical and healthcare services sector, Nomura remains cautious but has identified a few stocks with strong growth potential. The brokerage believes that these sectors will continue to see robust demand, driven by increasing healthcare spending and a growing population.

Overall, Nomura's equity strategy provides a balanced approach, considering both the risks and opportunities in the Indian market. Investors looking for long-term gains should consider these recommendations while keeping an eye on market trends and economic indicators.