After nearly a year and a half of staying cautious on Indian equities, global brokerage CLSA has taken a noticeable turn. The firm now believes that the worst phase for the market may be behind us, and the risk-reward equation is finally starting to look balanced again.
After staying cautious for nearly 18 months on Indian equities, the global brokerage CLSA has taken a noticeable turn. The change comes at a time when markets have seen sharp volatility driven by global tension, commodity swings and weak sentiment.
But according to the brokerage report, this phase of extreme pessimism may have already done most of the damage.
The brokerage house in its report said, “After 18 months of being bearish, we turn constructive on Indian stocks. We may have surpassed the ‘maximum pain’ point regarding both the Iran conflict and its impact on the market.”
Let’s take a look at the brokerage latest view on the Indian equities –
Portfolio reshuffle: Where CLSA is placing its bets now
With this change in outlook, CLSA has realigned its India focus portfolio by adding stocks that are better placed to benefit from a recovery cycle and improving sentiment.
The brokerage has added names such as HDFC Bank, Bajaj Finance, Larsen & Toubro, Mahindra & Mahindra, Vedanta and Varun Beverages.
At the same time, it has exited stocks like ITC, UltraTech Cement, Tech Mahindra, IndusInd Bank, Bajaj Auto and NTPC.
According to the brokerage report, these changes reflect a shift away from defensive positioning towards a more growth-oriented approach. It noted that it is now focusing on capturing upside rather than only protecting downside risks.
| CLSA India Market Strategy – | |
| Additions | Removals |
| HDFC Bank | ITC |
| Bajaj Finance | UltraTech Cement |
| Larsen & Toubro | Tech Mahindra |
| Mahindra & Mahindra | IndusInd Bank |
| Vedanta | Bajaj Auto |
| Varun Beverages | NTPC |
Current portfolio: A mix of financials, consumption and cyclicals
The updated CLSA India focus portfolio includes a diversified mix of sectors.
Key holdings include State Bank of India, ICICI Bank, Infosys, DMart, Oil And Natural Gas Corporation, Tata Motors, Godrej Properties, Eternal, Varun Beverages, Vedanta, HDFC Bank, Bajaj Finance, Larsen & Toubro, and Mahindra & Mahindra.
The brokerage also highlighted its strong track record, stating, “CLSA India focus portfolio has outperformed the Nifty in 17 of 21 quarters with total outperformance of 117ppt.”
‘Maximum pain point’: Why CLSA believes the market may have bottomed out
A key factor in the report is the concept of the “maximum pain point,” which refers to a stage where negative sentiment peaks and most risks are already priced into the market.
CLSA noted that the market inflection points in past events such as the Global Financial Crisis (GFC), demonetisation, Covid-19 and the Russia-Ukraine war have typically occurred soon after such extreme pessimism.
Building on this, the brokerage said, “We interpret the recent news flow on ceasefire as a pivotal signal; there are clear indications that both parties want to reach an immediate resolution. So, the worst may be behind us.”
However, it also cautioned that the recovery path may not be smooth and volatility could continue in the near term.
Macro outlook: What changes in the post-conflict environment
On the macro front, CLSA expects some lingering impact even if geopolitical tension ease.
The brokerage house in its report added, “Even after a confirmed ceasefire, we expect crude prices to remain elevated above pre-war levels (US$65) for at least a few months, likely settling at US$80–90/bbl.”
Furthermore, the brokerage does not expect aggressive rate hikes from the Reserve Bank of India. At the same time, it sees global trends such as a weakening US dollar potentially supporting flows into emerging markets like India.
Valuations and sentiment: A contrarian signal emerging
CLSA also pointed to extremely weak sentiment as a positive signal from a contrarian perspective.
It noted, “Our proprietary India Bull-Bear Index touched a low of 1% bullishness (like 2008 and 2020) last week after trading most of March in the extreme bearish zone. Such low sentiment readings have historically served as a powerful contra buy signal.”
Disclaimer: The information provided above reflects the current market analysis and specific stock preferences of a global brokerage. These views are for informational purposes and do not constitute a direct offer, solicitation, or recommendation to buy, sell, or hold any security. As market conditions and valuations fluctuate, readers are advised to consult a SEBI-registered investment advisor to assess how these portfolio shifts align with their individual risk profiles and financial goals.
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