- The short — leadership & laggards
- Sector drivers: what’s fueling moves
- Rotation map & risk flags
- Position sizing & exits
The short
- Leadership: Banks & Capital Goods — earnings visibility + orderbooks.
- Improving: Autos, Power, Pharma — breadth adds support.
- Cooling: IT & discretionary midcaps — stretched multiples vs deal flow.
- Froth: Microcaps with weak cash conversion — avoid illiquid spikes into events.
Sector drivers: what’s fueling moves
Banks & Financials
Loan growth steady; asset-quality tailwinds. PSU banks benefit from capex-linked credit; private banks defend NIMs with better CASA mix. Watch: deposit beta; wholesale funding share.
Capital Goods/Industrials
Backlogs at multi-year highs; execution cadence supports margins. Watch: order-to-revenue conversion, input-cost slippage.
Autos
Festive channel build and model cycles drive PVs; 2W recovery uneven. Watch: dealer inventory (weeks), discounting intensity.
Pharma
US launches + resilient India biz lift profitability. Watch: US pricing pressure; remediation status where applicable.
IT Services
Deal ramp lumpy; budgets guarded. Watch: large-deal TCV and margin defense vs wage/onsite mix.
Power/Utilities
Demand strength + tariff clarity support re-rating. Watch: PLFs, fuel linkages, receivables cycle.
Rotation map
| Sector | Status | Primary driver | Risk flag | Positioning cue |
|---|---|---|---|---|
| Banks | Leader | Credit growth, asset quality | Yield spike / deposit beta jump | Favor lenders with OCF/EBITDA > 0.8, lower wholesale mix |
| Capital Goods | Leader | Capex & execution | Input cost creep | Prefer diversified orderbooks; avoid single-client dependency |
| Autos | Improving | Festive demand | Inventory overbuild | Track dealer weeks; trim if > 6 weeks sustained |
| Pharma | Improving | US launches, mix | US price erosion | Prefer companies with ANDA pipeline and stable gross margins |
| IT | Cooling | Delayed deals | US slowdown scare | Stick to cost-takeout leaders; avoid premium without TCV proof |
| Power | Improving | Tariffs, demand | Fuel bottlenecks | Blend regulated + merchant exposure to smooth earnings |
Position sizing & exits
- Size by liquidity (ADV & free float). Cap single-name risk to what you can realistically exit in 3 trading days.
- Trim if a leader underperforms Nifty by 5–7% over 4 weeks or net earnings revisions turn negative.
- Reduce microcap beta on breadth deterioration (A/D line, % stocks at 52-wk highs rolling over).
Positioning matrix Overweight: Banks, Capital Goods. Neutral: Power, Autos, Pharma. Underweight: IT, frothy discretionary mid/smallcaps.