CLSA raises IT to overweight in model portfolio

MUMBAI: CLSA has raised the information technology sector to overweight in its model citing improving growth outlook for the US economy and favourable risk-reward.

The global brokerage said while US government policy remains a key risk for the sector, the risks are largely priced into the valuations.

"An improving growth outlook for the US economy, particularly the US financials and retail, is especially positive for the sector. With the sector underperforming by 5ppts (percentage points) YTD (year-to-data) and >25ppts over the past year, risk-reward has turned favourable," said CLSA.

HCL Techologies remains the top pick in the IT sector, said CLSA, adding the stock to its high conviction list.

The brokerage has removed Tata Motors from the model portfolio as margin outlook has weakened considerably. On Wednesday, CLSA had downgraded the stock to 'sell' from 'buy' and lowered target price to Rs 405 from Rs 650 due to the auto maker's poor show in third quarter earnings.

CLSA has reduced weightage to Hindustan Unilever, ITC and Maruti in the portfolio. The brokerage has also removed ITC and Maruti from its high-conviction list.

The brokerage has added GSK Consumer to the portfolio stating that the company's discounted valuation offers much better protection against margin risk for the sector.