Dalal Street Diwali sale: Kotak adds 5 midcaps with up to 37% upside -- Full list

Every Diwali, shoppers hunt for the best deals. Sale boards go up. Bags fill fast. Now imagine the same scene on Dalal Street, India's stock market hub. The shares have seen sharp correction lately. Is this a warning sign or time for some bargain buying in the stock market?

Kotak Institutional Equities, a brokerage firm in its report dated October 26 has a fresh shopping list. After the recent correction, several shares are trading below their earlier levels, prompting investors to look for value rather than chase rising prices.

Kotak Institutional Equities has reshuffled its recommended portfolios ahead of the festive season, adding six stocks to its mid-cap portfolio and changing allocations in its large-cap portfolio.

Here are key stocks that Kotak has identified after the market correction -

Why Kotak sees opportunities after the market fall

The brokerage identified three factors that could influence the market's next move - crude oil prices, corporate earnings and stock valuations. Uncertainty surrounding the Iran-US conflict and the risk of higher oil prices continue to weigh on India's economic outlook.

However, earnings have offered some reassurance. According to the brokerage report, the Q2FY27 net profits for the Nifty 50 companies that had reported were 1.7% above its estimates and 19% higher year-on-year.

Sanjeev Prasad, MD & Co-Head, Kotak Institutional Equities believes "that a greater focus on the favourable price-value gap in more stocks after the sharp correction in recent weeks will help dispel the 'gloomy' mood in the market."

In his strategy note, he pointed out that "many market participants are taking cues from prices and not from value, which has resulted in euphoria and despair in the market linked to price movements. We see value in more parts of the market , as valuations have come off sharply across sectors and stocks. Market multiples are reasonable, although we focus less on top-down index valuations."

Aster DM Healthcare: 37% upside potential

Aster DM Healthcare is one of Kotak's new mid-cap portfolio additions. Its shares fell 15% in the past month amid concerns about possible government price controls on medicines and other hospital products.

According to the brokerage report, the stock offers 37% potential upside to its 12-month fair value of Rs 880. Kotak believes its current valuation already reflects a moderate degree of government intervention. However, regulatory developments remain a risk.

Dixon Technologies: 33% upside after the fall

Dixon Technologies, which operates in electronics manufacturing services (EMS), is another stock returning to Kotak's recommended portfolio. Its shares declined 16% in the past month amid a broader market correction.

The brokerage sees 33% potential upside to its 12-month fair value of Rs 14,900. It continues to favour the company's position in electronics manufacturing, although its valuation and business outlook need monitoring.

Kotak on Emcure and Endurance Technologies

Kotak sees 26% potential upside in Emcure Pharmaceuticals, with a fair value of Rs 2,225. The stock declined 9% in the past month amid concerns about possible drug price controls. The brokerage expects earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 17% between FY26-29.

Endurance Technologies offers 34% potential upside to Kotak's fair value of Rs 3,000. Its shares fell 15% in the past month and 23% over the past year. The brokerage points to its exposure to two-wheeler exports and its progress in four-wheeler components.

Indegene and Mankind Pharma: Healthcare in focus

Indegene, which provides technology and outsourcing services to the global life sciences industry, offers 29% potential upside to Kotak's fair value of Rs 735. The brokerage expects the company to benefit from continued spending on digital transformation and outsourced services in the life sciences sector.

Mankind Pharma has moved from Kotak's mid-cap portfolio to its large-cap portfolio, reflecting its market capitalisation of $9.6 billion. It is a portfolio reclassification, not a new addition to the overall recommended portfolio.

Bajaj Finance replaces Bajaj Finserv

Kotak has also reshuffled its large-cap portfolio. Bajaj Finance replaces Bajaj Finserv, with both stocks retaining an unchanged portfolio weight of 480 basis points.

The brokerage prefers Bajaj Finance as a more direct investment opportunity, even though Bajaj Finserv trades at a substantial discount to its sum-of-the-parts valuation.

Reliance gains weight as Kotak trims other stocks

Reliance Industries receives an increased allocation, with its portfolio weight rising by 100 basis points to 730 basis points.

Kotak has reduced its recommended weights in Axis Bank and State Bank of India by 50 basis points each.

The brokerage has also trimmed HDFC Life Insurance by 25 basis points to 230 basis points, ICICI Bank by 50 basis points to 990 basis points, and Infosys by 75 basis points to 220 basis points.

What should investors watch this Diwali?

Sanjeev Prasad, MD & Co-Head pointed out that "the stalemate in the Iran-US war, high and rising crude oil prices and related macro headwinds may have (1) punctured the euphoria in the SMID segment of the market and (2) pushed investors to look at the large-cap. segment more favorably, given the reasonable value in many large-cap. Stocks."

According to him this rejig of portfolios offer "a better reward-risk balance in more stocks."