Broking firm CLSA has gone in for a radical overhaul of its portfolio of 'Modi stocks’ it had recommended last week, following the weaker-than-expected mandate for the NDA coalition.
Ahead of the election verdict, CLSA identified 54 companies that would have been direct beneficiaries of government's policies, with public sector undertakings (PSUs) making up half of these beneficiaries.
The brokerage has named these as 'Modi' stocks, since they have been rallying based on prospects of the BJP coming back to power.
CLSA has maintained only two of those stocks in its India focus portfolio: ONGC and Reliance Industries. What is working in favour of these stocks is that they have rerated by less than 15 percent in the last six months.
Prior to the election results, the brokerage said a big proportion of the upmove in Modi stocks was led by a material re-rating in earnings multiples.
"This was another sign of rising conviction on predictable policymaking and reforms going into the event, which appears very vulnerable now," said CLSA.
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The brokerage also excluded L&T from its India focus portfolio and replaced it with HCL Tech. L&T had been in CLSA's portfolio since its inception in January 2021.
Indian equity markets led by Modi stocks had approached the national elections with a lot of conviction in the continuity of a strong BJP government, said CLSA.
It added that the election verdict of the BJP lacking a simple majority questions this conviction and raises doubts over a stable government and policy-making styles.
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