CLSA, Morgan Staney Cut Exposure to Indian Equities, Bank Stocks
Indian shares correct as brokerages cut India weightage.
Investment banks CLSA and Morgan Stanley reduced weightage on India in their portfolios. CLSA cut its weightage by 2 percentage points and removed real estate player DLF from its model portfolio and added textile company Arvind, the global financial major said in its report, Greed & Fear dated September 22.
Citing the recent run-up in Indian banks - 30 percent in the last six months - Morgan Stanley reduced India’s weightage in their banking portfolio to 20 percent from 32.5 percent earlier. The run-up could be short lived as loan and deposit growth remains near a three-decade low, Morgan Stanley said in a report dated September 22.
HDFC Bank, Axis Bank, IndusInd Bank, Kotak Mahindra Bank are currently part of their banking portfolio. While the brokerage has cut weightage in the first three, they have exited from Kotak Mahindra Bank, which constituted 5 percent of their portfolio earlier.
Indian banks have risen 30 percent in the last six months. But with system growth (loans, deposits) lagging at close to 30-year lows, this run may hit a wall. Against this backdrop, carrying one-third of our portfolio in Indian banks is high. We reduce India’s weight to 20 percent; add to Australia, China.Morgan Stanley’s Research Note
The slow growth may also prohibit banks from cutting rates aggressively, the report added, while reduced loans to industry, coupled with low coverage is expected to keep credit costs fairly high going into financial year 2017-18.
The benchmark Nifty 50 has seen an upside of almost 15 percent in financial year 2016-17 so far, currently trading near its 52-week high of 8,968.