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Last Updated : Dec 19, 2019 02:12 PM IST | Source: Moneycontrol.com

Credit Suisse overweight on financials, telecom; shifts focus to 'safe' stocks in 2020

Credit Suisse expects narrow market performance to continue for now, as economic uncertainty continues to push funds into the “safe” stocks

 
 
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Global financial services company Credit Suisse expects the economic slowdown to continue in 2020.

Earnings may bounce back and investing in "safe stocks" should be the prefered strategy for next year, the brokerage said in a report, India Market Strategy, released last week.

“Market performance in CY20 thought would be affected by how FY22 EPS moves—we expect this too to settle at a low to mid-teens growth on the reduced FY21 base. We expect narrow market performance to continue for now, as economic uncertainty continues to push funds into the safe stocks,” said the note.

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For 2020, Credit Suisse has shifted to a more concentrated 30-stock portfolio where they have tried to reduce concentration risk by being more overweight on SBI than HDFC Bank.

The global investment bank will stay overweight on financials, telecom, utilities and metals. Pharma and IT also received minor uptick. It has a ‘Market Weight’ on staples and Underweight on discretionary cement, and industrials.

Top 30 stocks in Credit Suisse portfolio include RIL, HDFC Ltd, TCS, HUL, ICICI Bank, ITC, Bharti Airtel, Bajaj Finance, SBI, Tech Mahindra, Coal India, Dabur, Lupin, Chola Finance, ICICI Prudential, and Motherson Sumi.

Credit Suisse December

Credit Suisse also highlighted "quality bubble" which is likely to remain inflated for some more time till growth comes back.

The global investment bank in the report highlighted that foreign investors reacted to the weak economic activity levels. FPIs too have been focusing on the top 100 names, though that has been their focus generally.

Almost 76 percent of the FPI holdings are in the Nifty stocks, compared to 66 percent for the domestic institutional holdings. This ratio for DIIs was 56 percent a year back.

As a result, performance is becoming lopsided, driven primarily by a select few large and liquid stocks, with the majority of stocks being 20-30 percent below their all-time highs even though most indexes are close to lifetime highs.

“Till growth uncertainty continues (we expect for another six months), we expect this “quality bubble” to stay inflated and market concentration to remain high,” said the note.

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First Published on Dec 19, 2019 01:51 pm
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