Markets geared for steeper fall: CLSA

CLSA has said that the Indian markets were geared for a much steeper fall than what was seen on Thursday.

The international brokerage has also said that it is raising its rating on IT sector to overweight in its model portfolio.

CLSA is saying that Indian markets could have fallen in a much steeper manner than what they fell on Thursday and this is due to the derivative market, which is moving the cash market now. They are saying that the retail open interest, which was at $7 billion in January has risen to $12 billion now and this will lead to volatility.

CLSA expects volatility to continue and they have made some changes in their model portfolio to take advantage of the fall that we recently saw. CLSA likes the consumption story in India. They like stocks, which are led by consumption like hotels, banks, consumer staples, telecom and the highest weightage that they have is on the infotech sector, followed by banks.

They have added a few stocks like Hindalco Industries to take advantage of the 20% fall that the stock has seen recently. They have also added Wockhardt because the issue that the company was facing on the US FDA seems to have been resolved now. They have increased weightage for Infosys Technologies by 4% point and Reliance Industries by 2% point.

Infosys Technologies basically because the rupee depreciation is expected to add to the bottomline and they are saying it is attractive because it has cleared 25% EPS growth visible for next two years. And they like Reliance Industries because it is going aggressively on its retail plans.

They have deleted Biocon, BPCL and Satyam Computer Services and they have cut down their weight on Tata Motors and also their cash by 2%. So their cash component now stands at 5% instead of 7%.

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