Multiple brokerages have released comprehensive sector views and stock recommendations, with cigarette taxation concerns dominating ITC coverage while positive outlooks emerge for quick-service restaurants and capital goods.

ITC Faces Widespread Downgrades on Tax Concerns

The cigarette major received predominantly negative coverage from brokerages following steep excise duty hikes. The tax increases have prompted significant target price cuts and rating downgrades across the board.

The excise duty on filter cigarettes has been raised to ₹2,100-8,500 per thousand sticks depending on length, representing increases of 20-65% across categories. Most brokerages expect this to necessitate price hikes of 25-35% to maintain margins, potentially leading to significant volume declines and consumer down-trading to cheaper variants.

DAM Capital and Macquarie maintained Buy and Outperform ratings respectively, though both cut target prices. DAM Capital expects the adverse volume impact to become visible from Q1FY27, while building in 7% volume de-growth for FY27. Macquarie noted that moderating leaf tobacco costs could offer some margin cushion despite growth concerns.

Devyani International Gains Positive Coverage

The quick-service restaurant operator received encouraging assessments from brokerages focusing on merger synergies and growth prospects.

Emkay emphasized that merger and brand negotiations are expected to deliver sizable scale and synergies, with the combined entity having similar scale and growth prospects as Jubilant FoodWorks. The brokerage estimates significant cost savings at around 15% of combined EBITDA, with shareholders of both companies expected to benefit equally from synergies.

Capital Goods Sector Receives Strong Support

Jefferies maintained a constructive stance on the capital goods sector, expecting infrastructure and industrial capex CAGR of 10% over FY26-29 versus 6% over FY24-26.

The brokerage highlighted power transmission & distribution and defence capex as remaining strong drivers. Siemens Energy is expected to benefit from operating leverage and robust power capex pipeline, while HAL offers five-year growth visibility driven by indigenisation initiatives.

Broader Market Strategy and Pharma Updates

Morgan Stanley expects earnings to beat expectations with scope for further government reforms and potential US trade deals. The firm remains overweight on lenders and discretionary consumption, noting that India's relative valuations have corrected meaningfully and may have troughed in October.

In pharmaceuticals, Jefferies noted that Zydus remains confident of growing US revenues in FY27 despite a high FY26 base, while Emcure is well-placed to deliver low double-digit revenue growth with EBITDA margin expansion. JPMorgan maintained an Underweight rating on Dr Reddy's Laboratories with a target price of ₹1,170, citing regulatory setbacks that delay entry into the US biosimilars market.

Citi set a December 2026 Nifty target of 28,500, implying 10% upside, with optimism hinging on financial sector earnings recovery driven by bottoming NIMs and faster credit growth.

Dixon Technologies faces near-term headwinds as CLSA significantly reduces its target price, citing expected revenue weakness in the upcoming quarter. The brokerage maintains its positive long-term outlook while acknowledging short-term challenges facing the electronics manufacturing services sector.

CLSA Downgrades Target Amid Q3 Concerns

CLSA has maintained its Outperform rating on Dixon Technologies while substantially cutting the target price to ₹15,800 from ₹18,800. The brokerage expects flat year-on-year revenue growth in Q3 with potential quarter-on-quarter decline, reflecting broader sector challenges.

The revised target price represents a 34.00% upside potential from current levels, despite the significant reduction. CLSA has cut FY26-27 earnings per share estimates by 16.00% and 17.00% respectively, citing lower volumes and margin delays as key concerns.

Medium-Term Recovery Prospects

Despite near-term challenges, CLSA remains optimistic about Dixon Technologies' medium-term recovery visibility. The brokerage has kept FY28 EPS estimates unchanged, indicating confidence in the company's longer-term trajectory. A key recovery driver identified is margin improvement through backward integration, particularly in the smartphone division.

The smartphone segment represents a crucial revenue driver for Dixon Technologies, and successful backward integration could significantly enhance profitability. CLSA notes that while FY26 guidance cut risk is emerging due to current headwinds, the recovery timeline remains intact.

Sector-Wide Challenges Impact EMS Space

Electronics Manufacturing Services stocks have faced pressure throughout the year due to multiple factors including near-term headwinds, geopolitical tensions, and delays in government grants. These challenges have dampened overall sector sentiment, though analysts maintain bullish long-term perspectives.

Dixon Technologies has witnessed significant drawdown on a year-to-date basis, reflecting broader sector concerns. However, the substantial upside potential indicated by CLSA's revised target suggests the current correction may present opportunities for long-term investors.

Market Outlook and Investment Perspective

The brokerage's analysis highlights the dichotomy between short-term operational challenges and long-term structural growth opportunities in the EMS sector. While immediate quarters may see revenue pressure, the medium-term recovery thesis remains supported by India's electronics manufacturing growth story and Dixon Technologies' strategic positioning.

CLSA's maintained Outperform rating despite the target price cut reflects confidence in the company's ability to navigate current challenges and capitalize on future growth opportunities through operational improvements and market expansion.