Various strategy reports suggest brokerages are getting positive on banking stocks even as they have turned cautious on metals. They have also turned ‘overweight’ on industrials, telecom and utilities amid reasonable valuations, become ‘neutral’ on staples and ‘underweight’ on pharma stocks.
Meanwhile, they are also advising investors to go for a rotation within the IT sector.
“Nifty50 may hit the 16,100 level by December,” Axis Securities said on Thursday, as it feels the market has not fully factored in the likely demand loss in June quarter.
“A clearer picture of FY22 earnings will emerge only when the June quarter concludes. The market is looking for the timely unlocking of the economy and any delay in the reopening will pose near-term risk to FY22 EPS. Notwithstanding the near-term challenges, the overall market structure continues to be positive,” the brokerage said.
Nifty50 hit an all-time high of 15,693 in Thursday’s trade and is up 12 per cent, or 1,636 points, year to date. Given the recent rise, various brokerages have made changes to their model portfolios over the past two weeks to capture the projected growth.
JM Financial, which sees Nifty50 at 17,500 level in the next 18 months, said it prefers large banks and would avoid microfinance and small banks in the near term.
In a strategy note released on May 31, the brokerage said the brokerage is turning cautious on commodities and continues to prefer industrials. The broking firm likes the telecom sector as it sees significant addition to mobile data subscribers and also possible tariff hikes ahead.
CLSA is hugely overweight on banks. It said financials outperformed the equity benchmarks in 14 of the top 19 world markets, but in India, they underperformed due to uncertainty over normalisation.
This brokerage has replaced Axis Bank with HCL Tech in its India Focus portfolio, as it reduced weightage in defensives after the strong outperformance of last two months. Other than Axis Bank, CLSA has ICICI Bank and SBI in its portfolio.
Credit Suisse has stayed ‘overweight’ on private banks and SBI. It has cut metals from ‘overweight’ to ‘underweight’, and booked profits in some of the positions that it had taken in December 2020.
The brokerage said metal prices can go higher and stay elevated in a super-cycle, but the current surge in apparent demand has been due to an extreme inventory cycle, and not a structural increase.
The foreign brokerage remained underweight on IT stocks, cutting weightage in
due to poor EPS revisions, but assigned some weightage to TCS due to its relatively low P/E vis-a-vis Infosys.
Credit Suisse has cut the weightage on ‘staples’ to market weight, exited Nestle India and assigned a smaller weightage to Marico. It stayed ‘underweight’ on pharma but likes pharma stocks such as Dr Reddy’s Labs and Aurobindo Pharma. It, meanwhile, likes industrials and
in the telecom space.
Morgan Stanley said a strong government capex and a nascent pickup in private capex, in addition to the inexpensive valuations have made it prefer industrials. Even as financials have lost their leadership status, a tactical bounce could be very strong, it said.
Utilities, Morgan Stanley said, is another rate-sensitive sector that is supported by attractive valuations.
“The healthcare sector has demonstrated leadership qualities, but is likely to take a breather as attention shifts to cyclicals and rate sensitives,” the foreign brokerage said.
Axis Securities is positive on ICICI Bank, SBI, Federal Bank, Bharti Airtel, HCL Tech,
, Lupin and ACC, among others. JM Financial likes ACC, Bharti Airtel, Axis Bank, NTPC, Hero MotoCorp and .
