The firm said incoming US President Donald Trump’s policies on export-focused emerging markets like India and China, uncertainty around interest rate cuts, and a rising dollar may impact the markets.
It remained overweight on commodities and insurance; while IT, discretionary, industrials, and healthcare are its big underweights. The firm cut its overweight rating on banks.
The brokerage sees valuations of many large-cap consumption stocks trading at much lower premiums to historical averages than the premium seen in investment and capex stocks.
“Capex spending by both central and state governments has seen double-digit declines in the fiscal year so far and are likely to miss their full-year target as the government grapples with balancing its welfare plans as well as fiscal consolidation goals,” said CLSA in the client note. “These may drive at least a short-term shift in favour of stocks in consumption and some cool-off in the elevated valuations of investment and capex names.”
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It added Tata Motors, NTPC, Nestle and Britannia to its India focus portfolio and removed HDFC Bank.CLSA said that Tata Motors is adequately building in risks of a slowdown in commercial vehicles and the Jaguar Land Rover (JLR) portfolio, while the drop in NTPC shares is an opportunity to bet on the power theme. Nestle and Britannia may benefit from low investor expectations amid changing government actions in favour of affordable consumption.
