CLSA has retained its "overweight" stance on the pharma sector and on private sector banks (due to continued better asset quality trends). It maintained its "underweight" call on staples citing premium valuations and risks to growth.
Here are the stocks that feature in CLSA's new portfolio:
1) Sun Pharma's 15 per cent plus operating earnings growth can see further upsides through niche US opportunities like Prandin.
2) Cipla: It will see margins improving with favourable currency and increasing utilization of Indore SEZ.
3) Adani Ports has been included as its preferred infra play. The company should drive multi-year volume growth without much capex, CLSA said.
4) Axis Bank: Investors’ fears on Axis’ asset quality resulted in valuation derating. However the reality on asset quality has been better than expectations with stressed asset ratio of 3 per cent among the lowest in the sector.
Stocks that have been removed:
5) Dr Reddy’s: Weak earnings momentum because of limited number of incremental opportunities in the US.
6) Tata Steel: Falling trend in iron ore and steel prices.
7) IndusInd Bank: The downturn in commercial vehicles cycle.
8) BHEL: The stock is up 10 per cent over the last three months, but the orderflow outlook remains weak.