As global brokerage remains bullish on Indian equities and sees it insulated from global headwinds, it advises its investors to focus on quality growth, earnings visibility, targeted alpha themes. In its recent EM Equity Strategy report dated November 18-the global brokerage said quality factors have outperformed in past periods of growth slowdown.

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We highlight 4 flavours of quality added the report:

- Strong balance sheets,

- High earnings visibility,

- Positive EPS revisions,

- and(4) Low beta stocks.

The brokerage highlighted that valuations have de-rated 8 per cent after the recent pullback, but still trade at nearly 23x fwd. PE for MSCI India, which is 1.4 s.d above its 10-year mean and above the brokerage's ‘fair value’ estimate of 21x, suggests further de-rating risk. History suggests muted near-term returns when starting valuations are high and earnings are seeing downgrades.

As a whole, the brokerage remains marketweight on India within its Asia/EM 2025 allocations. Sectorally, it remains overweight (OW) on select domestic sectors with higher earnings visibility like autos, telcos, insurance, realty, and internet.

Also, the global upgraded exporters like Infotech to OW and Pharma to MW on stable/improving demand, EPS tailwinds from weaker INR and defensive characteristics. 

So, even as the momentum looks weak amid range-bound forecast for the bluechip Nifty index, the brokerage suggests a buy on 16 stocks that have fallen over 20 per cent from their recent 3-month highs and command reasonable valuations in comparison to their historical averages.

The stocks on the list are Trent, Indigo, Shriram Finance,Havells India, Cholamandalam Investment, IndusInd Bank, Aurobindo Pharma, AU Small Finance Bank, Phoenix Mills, L&T Finance, Emami, Star Health and Allied Insurance, Crompton Greaves, Kajaria Ceramics, C.E. Info and CreditAccess Grameen. The drag in the stock has been steep up to 30 per cent from the last 3-month highs.