Macquarie’s Portfolio Rejig: Stocks That Saw Increase Or Decrease In Weight
A manager weighs banknotes on a scale. (Photographer: Manaure Quintero/Bloomberg)

Macquarie’s Portfolio Rejig: Stocks That Saw Increase Or Decrease In Weight

Macquarie raised weights for state-run entities in its portfolio after the Union Budget, citing “more tangible upside” for a one-year view.

“Post budget FY22, we have significantly increased weight to ‘value state-owned asset plays’,” the global financial services provider said in a research note. “We keep a strong weight in digitalisation (25%), financialisation (17%) and building India (12%), while lowered weight in the relatively expensive consumption (700 basis points to 7%), and carry a 6-8% weight on other themes Make in India, gas-based economy, rural and commercial vehicle recovery.”

The weight of PSUs in Macquarie’s India Opportunities Portfolio now stands at 18% compared with 12% in December 2020.

Here are some stocks for which Macquarie increased its weight:

State Bank of India

Macquarie increased its weight on India’s largest lender by 600 basis points to 9%. “With government’s renewed focus on infrastructure and better use of digital channels in onboarding customers, SBI is well poised to grow its loan book at 1.2x system growth.”

HCL Technologies

The technology services provider saw its weight in Macquarie’s portfolio rise 250 basis points to 8%, on account of new deal wins and better revenue growth. Macquarie expects further upside to its current multiples.

Larsen & Toubro

Macquarie raised weight for the nation’s largest engineering and construction company by 200 basis points to 8% on record order backlog, strong tendering prospects and well-managed balance sheet. “Infra push in the recent budget can trigger a further rerating of the core business.”

Hindustan Petroleum Corp

At five times price-to-earnings, Macquarie said, the oil marketer’s stock provides deep value and more conviction in the bottom-up capacity expansion-led growth story. It increased its weight on the stock by 100 basis points to 5%.

LIC Housing Finance

The mortgage lender is a new addition to Macquarie’s portfolio as a “value play”. A pick-up in home loan demand and builder non-performing loan resolutions are cited as key catalysts by the research firm.

Stocks that Macquarie deleted from its portfolio or cut exposure:

Maruti Suzuki

India’s largest carmaker is trading near Macquarie’s price target of Rs 7,600. “Alpha headwinds in the form of weak margin and expensive valuation offset positives of strong passenger vehicle upcycle,” the research firm said.

Bajaj Auto

The two-wheeler stock is now trading beyond Macquarie’s price target of Rs 4,050. Key catalysts such as margin improvement in the domestic business and growth in exports have already played out, the research firm said.

  • Macquarie has re-allocated its weight on Shree Cement Ltd. to LIC Housing Finance as it had achieved its price target, while Ambuja Cements Ltd.’s weightage was re-allocated to Larsen & Toubro.
  • Zee Entertainment Enterprises Ltd. was removed from Macquarie’s portfolio ahead of its results as the “trading upside was captured”.
  • The research firm cut exposure on SBI Cards & Payment Services Ltd. as the pure-play credit card issuer achieved its price target. But the research firm remains “constructive” for the long term with a 25% return-on-equity outlook.
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