CLSA: CLSA positive on banks, cement and Larsen & Toubro

Mumbai: CLSA is recommending investors to shift to banks, cement and Larsen & Toubro from IT and pharma as it expects the trend of economic normalisation to favour domestic plays.

In the past 10 years, 60 per cent of the performance leaders of the first nine months have become underperformers in the last quarter of the calendar year and laggards become outperformers, the brokerage said. IT and pharma stocks have been outperformers so far in 2020.

“A 20 per cent decline in India’s active Covid-19 cases from its peak and hopes of a vaccine in 2021 may drive economic normalisation over the coming months… This, along with rising hopes of a vaccine in early-2021 should make the market see the light at the end of the tunnel and start playing for economic normalisation soon,” said CLSA.

It said that at 18 times PE on normalised FY22 EPS, the absolute upside for the index may be capped as it is less than 10 per cent away from its 15-year high of 19.6 times seen in January 2008.

CLSA said six pharma stocks, two IT names and RIL are the top 10 outperformers for the January-September period while five financials, L&T and PSUs are the 10 biggest underperformers. It prefers ICICI Bank, SBI and HDFC Bank the most in the financials space and likes UltraTech in cement sector.

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