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Credit Suisse (CS) has removed HCL Technologies from its information technology model portfolio and replaced it with Tata Consultancy Services. According to the Swiss investment advisory firm, HCL Tech has been removed due to poor earnings revision compared with peers, and TCS added due to “the near-term underperformance of TCS vs Infosys, with the P/E premium at 30-month lows, which creates some room for TCS to catch up.”
However, CS has retained its ‘underweight’ stance on the information technology sector. “Our sector underweight is due to zero positions in Wipro, Tech Mahindra and now HCLT,” it said.
Besides, CS has also trimmed its ‘overweight’ stance on metals to ‘underweight’ as it believes the present uptrend in demand is not structural and will not sustain. “Metal stocks are at a multi-year high price-to-book value, which has turned the risk-reward unfavourable,” the investment advisory firm said.
Among the metal pack, CS has removed Tata Steel from its 30-stock portfolio and replaced it with Hindalco Industries.
Credit Suisse, however, turned ‘overweight’ on the cement sector as it expects the companies to benefit from lower global input costs, whereas prices are local. Despite near-term concerns, CS added UltraTech Cement to its model portfolio due to its capacity expansion plans and reduction of fixed costs.
Marico in, Nestle out
The investment advisory firm has reduced the weightage of Staples to marketweight from overweight by replacing Nestle India with Marico. The brokerage expects Marico to benefit from growth in new businesses.
Credit Suisse also added Asian Paints to its model portfolio as it expects that pricing power will benefit the paint company due to normalising of petrochemical prices and fall in costs.
The brokerage has remained “underweight” on NBFCs and removed Bajaj Finance from its model portfolio. Besides, it has remained “underweight” on insurance companies and on telecommunications, utilities and energy sectors.
Stock-specific on pharma
Credit Suisse prefers to be stock-specific in the healthcare sector and favours companies such as Dr Reddy’s Laboratories and Aurobindo Pharma, which are beneficiaries of Covid-19 drugs, vaccine distribution, and have a better pipeline in the US.
The brokerage continues to remain “heavy overweight” on Industrials (capital goods and engineering) as it expects an improvement in operating performance, going forward. It also retained its “overweight” on banks, which includes private sector banks and State Bank of India, as these stocks are the best plays on expectations of better-than-estimated growth in the medium term.
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