Core Viewpoint - Prabhudas Lilladher (PL) remains bullish on large-cap stocks, selecting 11 stocks to buy, while also identifying 7 mid and small-cap stocks, totaling 18 preferred picks [1][12]. Market Performance - Nifty has shown resilience over the past three months, trading at 26,175 with a gain of 290 points, needing to cover 90 points to surpass its lifetime high of 26,277 [2][14]. - The ongoing rally is attributed to strong corporate performance in 2QFY26, with sales, EBIDTA, and PAT growth of 8.1%, 16.3%, and 16.4% respectively, alongside an EPS upgrade for Nifty [3][14]. Economic Drivers - Economic momentum is expected to be driven by domestic demand, influenced by several factors: 1. Income tax rate cuts benefiting over 80% of individual taxpayers [6][14]. 2. Anticipated 100 basis points rate cut by the RBI to stimulate growth [6][7]. 3. Healthy rural incomes supported by a strong monsoon and robust harvests [9][14]. 4. Low inflation rates, with CPI at 1.7% for September and projected at 1% for the December quarter, enhancing real purchasing power [10][14]. 5. GST rationalization contributing to demand revival [11][14]. Banking Sector Outlook - Improvement in bank performance is expected, with Net Interest Margins (NIMs) having bottomed out and credit growth recovering from 9% to a projected 11-13% in the second half of the year [8][14]. - Benefits from lower interest rates are anticipated to reflect in liability repricing from 3Q26, with potential for an additional 25 basis points rate cut in FY26 [8][14]. Stock Recommendations - Preferred large-cap stocks include ITC, Larsen & Toubro (L&T), Mahindra & Mahindra (M&M), and others [12][14]. - Broader market picks include Ajanta Pharma, Fine Organic Industries, and Voltamp Transformers [12][14]. Government Capex Concerns - There is a potential cool-off in government capital expenditure, which has increased significantly since COVID, with a 40% rise in 1H capex possibly leading to a 10% year-over-year decline in 2H26 unless the government exceeds its capex allocation [12][14].