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CLSA Tweaks India Portfolio After Election Outcome; HCLTech Replaces L&T

The portfolio includes only two stocks from the "Modi stocks" bucket, namely ONGC and Reliance. While private banks, IT, insurance, and commodities are CLSA's preferred sectors.

Rucha Somaiya
The CLSA Ltd. logo is displayed at the company's office in Hong Kong, China, on Wednesday, July 5, 2017. Citic Securities paid about $1.2 billion for CLSA as it stepped up efforts to expand abroad, and merged its Hong Kong investment-banking operations with those of CLSA in 2015. Photographer: Anthony Kwan/Bloomberg

CLSA has turned defensive, replacing Larsen & Toubro Ltd. with HCL Technologies Ltd. in its India focus portfolio, as tigther-than-anticipated election outcome raises concern of policy-making styles.

"These doubts openly question the notable premium of Indian equities versus history, compared to bonds, the near record premium of small and mid-cap, or SMIDs, and the recent re-rating of Modi stocks," the brokerage said in a note.

This portfolio includes only two stocks from the "Modi stocks" bucket, namely ONGC and Reliance. While private banks, IT, insurance, and commodities are CLSA's preferred sectors.

Sectoral Play Hereon

The brokerage is 'underweight' on autos and industrials, which supports its move to remove Larsen & Toubro from its India Focus portfolio. L&T has been in its portfolio since its inception in January 2021. The house is now clearly 'overweight' in banks, commodities, and IT, along with insurance and staples, with ITC Ltd. being the preferred staples name.

What's Constituents India Focus Portfolio

The India Focus Portfolio consists of 11 stocks, viz., Reliance Industries Ltd., HDFC Bank Ltd., ICICI Bank Ltd., Infosys Ltd., HCL Technologies Ltd., Axis Bank Ltd., Oil and Natural Gas Corp., SBI Life Insurance Co., IndusInd Bank Ltd., Hindalco Industries Ltd., and ITC Ltd.

ONGC and Reliance, which have rerated by less than 15% in the last six months, are the only "Modi stocks" exposures. "We fear de-rating in the expensive discretionary and capex space and prefer valuation support in private banks," the note said.

Also Read: Coalition Government Raises Policy Uncertainty Concerns, Brokerages Warn Of Near-Term Volatility

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