Tata Motors, three other shares get added to CLSA India model portfolio; HDFC Bank out

Tata Motors Ltd., along with three other companies, NTPC Ltd., Nestle India Ltd., and Britannia Ltd. have been included in brokerage firm CLSA’s India focus portfolio. On the other hand, India’s largest private lender, HDFC Bank has been removed from the portfolio as the brokerage has cut its “overweight” stance on banking stocks.

After a 35% drop from its peak, CLSA believes that Tata Motors is adequately building in risks of a slowdown in commercial vehicles as well as its Jaguar Land Rover (JLR) portfolio.

CLSA expects muted returns for the Nifty in 2025 amidst an uncertain and risky global macro environment, along with a near-term economic slowdown in India, coupled with absolute and relative valuations.

The brokerage has cited a correction of over 20% from their respective peaks as the rationale behind adding Tata Motors and other three names into its India focused portfolio.

Aside of these four additions, CLSA remains overweight on commodities and insurance space, while IT, consumer discretionary, industrials and healthcare are their big “underweights.”

CLSA wrote in its note that the severity of Donald Trump’s trade restrictions after he takes charge on January 20, may decide the outlook for the export-focussed Emerging Markets like China. “Less severe trade restrictions may attract inflows into EMs like China, which could make India underperform in a broader EM rally led by laggards, while the reverse may also be true,” the brokerage said.

India’s equity valuations remain well above their long-term average as well as their relative premium to peer markets and that may keep returns muted for the Nifty in 2025, according to CLSA.

Here’s what CLSA said with regards to including other names in its India portfolio, and excluding HDFC Bank:

• NTPC: Correction gives an opportunity to be in the power theme as well as gains from capacity addition in the first half of financial year 2025.
• Nestle India and Britannia: CLSA has included these stocks into their India portfolio to benefit from low stock expectations, despite changing government actions in favour of affordable consumption. They have also been added to the model portfolio after a big drop in their respective stock prices.
• HDFC Bank: The rising defensive nature of the portfolio in the face of turbulent global macros prompted CLSA to remove HDFC Bank from its portfolio and also cut its large “overweight” on banks ahead of potential RBI rate cuts.