Global brokerage firm CLSA, in its latest strategy note, stated that it anticipates Modi 3.0 becoming a reality with backing from allies — the Telugu Desam Party (TDP) and Janata Dal (United).
The brokerage anticipates that shares of Larsen and Toubro, IRB Infrastructure Developers, NCC, and J Kumar Infraprojects will be key beneficiaries. CLSA has noted that a dividend from the Reserve Bank of India (RBI) will secure funding for any government social expenditure.
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Channel checks indicate an ambitious 100-day plan for Modi 3.0, with large orders expected to be placed across infrastructure and defense, according to the brokerage’s note on capex.
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Additionally, the foreign brokerage stated that demands from the Bharatiya Janata Party’s allies for increased capital expenditure in Andhra Pradesh and Bihar should revive state capex.
CLSA on June 5 announced it had adjusted its India portfolio to adopt a more defensive strategy. The brokerage replaced L&T with HCL Technologies in its India-focused portfolio. It is now distinctly overweight on banks, commodities, IT, as well as insurance and staples.
CLSA noted that its exposure to such stocks is limited to ONGC and Reliance Industries Ltd., as these have rerated by less than 15% in the past six months. The brokerage expressed concerns about potential de-rating in the expensive discretionary and capex sectors, and now favors the valuation support found in private banks.
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