Brokerage firm Kotak Institutional Equities has listed its top picks for May which include the likes of Apollo Hospitals, Finolex Industries, ICICI Bank, ITC, L&T, Mahanagar Gas and Marico.

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Indices have been on a downward trend, declining 23 percent in 2020 amid the coronavirus crisis and its economic impact of the nationwide lockdown to contain its spread. Various experts have highlighted different ways to deal with this crisis. And Kotak has said that a safe bet would be to stay with large-cap stocks during the period.

The reason cited by Kotak is the impact on earnings, which could be higher for mid and small companies if the slowdown continues for a longer period, the brokerage house said in a report. It noted that investors can expect activity in mid and small caps to pick up with a lag effect, mainly in the second half of the next bull phase.

"The intermittent falls in the market due to volatility and earnings downgrade could offer a great opportunity to accumulate high-quality large-cap stocks. In a slowdown, it is ideal to stay put with mega/large-cap stocks," it said in a report.

The valuation gap between large caps and mid-caps has narrowed, which also makes a case to be with large caps as bigger companies have stronger balance sheets that help them sustain the slowdown in an efficient way when compared to mid and small-cap companies, the brokerage firm said.

It noted that if investors have a one-year horizon then it is ideal to have a proper mix of cash and safer stocks in their portfolio. Long term investors with a two to three-year horizon should look to buy consistently on every decline, the report added.

The brokerage also cut FY21-22E net profit estimates for the Nifty50 Index stocks sharply in the past one month and are now expecting FY20, FY21 and FY22 Nifty50 earnings to grow by 5 percent, 5 percent, and 27 percent, respectively.

Kotak also sees a high downward risk to FY21 estimated with further downgrades in earnings of banks and oil and gas sectors. As the base case for India, it expects the economy and corporate earnings to gradually recover from the second half of FY21 and broadly ‘normalize’ in FY22.