CLSA has replaced HDFC Bank and added Tata Motors, NTPC, Nestle and Britannia in its portfolio. Here is everything you need to know on why CLSA is Overweight staples along with commodities.
If you are looking for good bargain buys in 2025, CLSA has interesting large cap picks. Skimming for large caps that have corrected over 20%, CLSA has added Tata Motors, NTPC, Nestle and Britannia to their India focus portfolio. Meanwhile the brokerage house has also cut the Overweight stance on banks and removed HDFC Bank.
CLSA is forecasting muted returns for the Nifty in 2025. According to them, “valuations for India still remain extended.” Comparing the Nifty 12-month forward PE to its historical valuations, CLSA outlined the risks involved. The report highlighted the uncertain and risky global macro environment along with a near-term economic growth slowdown in India in the face of elevated absolute and relative valuations. In fact, the NSO’s first advance estimates of FY25 GDP growth estimate, pegs it at a 4-year low of 6.4%. The revised growth numbers suggest moderate economic expansion, high inflation, strained consumption and external factors that may influence overall performance in the coming months.
CLSA Overweight Commodities, staples
CLSA in the report outlined the economic concerns and highlighted what spurred the choice of stocks and the sectors that they represent and explained that, “underperformance of actual capex spending versus expectations and rising tailwinds for affordable consumption make us favour this sector and raise staples to a big overweight.” They remain “Overweight commodities and insurance. IT, discretionary, industrials and healthcare are our big Underweights.” With the recet additions, even Staples join the list of ‘Overweights’ on the CLSA list.
The recent correction in the market has been quite steep and with more than half of the NSE 200 stocks trading more than 20% below their 52-week highs., CLSA has identified 30 companies with positive recommendations.
Why is CLSA betting on Tata Motors, NTPC, Nestle and Britannia?
Here is an analysis of CLSA’s top bets at the moment –
Tata Motors: According to CLSA, “after over 35% decline, we believe Tata Motors is adequately building in risks of a slowdown in commercial vehicles as well as the Jaguar Land Rover (JLR) portfolio.”
NTPC: CLSA is looking at the correction in the stock as an opportunity to foray into the “power theme as well as gains from some capacity additions in H1FY25.
Nestle and Britannia: CLSA has added these two stocks in their portfolio after the recent decline in stock value “to benefit from low stock expectations despite changing government actions in favour of affordable consumption.”
These additions “raise the defensiveness of our portfolio in the face of a turbulent global macro after Trump takes office,” stated the CLSA report.
Why did CLSA remove HDFC Bank from portfolio?
Giving the rationale about why CLSA removed HDFC Bank from portfolio, the report elaborated that “this cut and adjusting weights to accommodate new entrants make us reduce our Overweight on banks ahead of potential RBI rate cuts. IT, pharma and discretionary remain our key underweights even as staples becomes a big Overweight, joining commodities.”
Outlining the performance of the CLSA India Focus portfolio the report stated that, “Although our portfolio managed to outperform the Nifty by a small 30 bps in 2024, it underperformed by a material 4.1ppts in the last quarter led by big correction in some of our holdings.”
According to the report, the CLSA portfolio has outperformed in 14 of 16 quarters since its inception in January 2024 totalling a returned of 186.7% Vs 77.3% for Nifty during this period.”
CLSA’s call on India Vs EM peers
CLSA sees the probability of India underperforming the broader EM rally. According to their analysis, “conflicting macro set up for 2025, severity of Trump’s trade restrictions after he assumes charge in less than three weeks may decide the outlook for export-focussed emerging markets (EMs) like China. Less severe trade restrictions may attract inflow into EMs like China which could make India underperform in a broader EM rally led by laggards while the reverse may also be true.”
The commentary from the US Fed last month raised doubts on the possibility of large rate cuts in the US in 2025. This, along with Trump’s stance, “may feed into a stronger US dollar. On the other hand, with a new head and the likelihood of a cool-off in inflation due to a high base, we see a conducive set-up for the RBI to consider rate cuts,” added CLSA. However outperformance of Indian bonds as well as the rupee to global peers in 2024 have made them relatively overvalued. This they believe would limit any big cool-off in Indian bond yields.
Source: www.financialexpress.com
