NEW DELHI: Domestic brokerage firm Kotak Institutional Equities has reduced stake in four IT stocks – HCL Tech, TCS, Infosys and Tech Mahindra – and picked speciality chemical stock SRF in its model portfolio.
“We include SRF (150 bps) bps) in the portfolio. SRF stock is trading at 25.2X FY2024E EPS and its valuations have become more reasonable after 13-14 months of trading in a narrow band. The stock offers 24% potential upside to our 12-month fair value of Rs 2,830. We have always liked SRF’s business model and its specific chemistry skills,” Kotak said in a note.
It has shaved off positions in Hindalco (40 bps to 150 bps), ICICI Prudential Life (30 bps to 150 bps) and 20 bps each in HCL Tech, Infosys, TCS and Tech Mahindra to create space for SRF.
Other top picks in its long-term largecap model portfolio includes HDFC Bank, ICICI Bank, SBI, Axis Bank, L&T and M&M.
Kotak’s midcap model portfolio, which includes Federal Bank, Cummins India, Crompton Greaves, Sobha, LIC Housing Finance and Union Bank, remains unchanged.
Stating that 2022 may be the template for the next few years given heightened geopolitical risks, higher interest rates, slowing China and large climate change-related uncertainties, Kotak’s Sanjeev Prasadi said the expensive valuations of the Indian market and of ‘growth’ stocks pose risks to market performance.
“We expect a de-rating in the multiples of ‘growth’ stocks as the market reconciles to (1) ‘high’ rates through 2023 and (2) limited acceleration in economic growth,” he said.
In 2022, the headline index Nifty outperformed most other global indices as it ended the year about 4% higher. The returns, however, in USD terms, were -6%.
PSUs, financials and consumer staples outperformed the market, while IT Services, healthcare and realty underperformed the market. Largecaps did better than the mid and smallcap indices.
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