Global brokerage CLSA in a recently released report post Lok Sabha Elections 2024 results noted that the election verdict of the BJP lacking a simple majority questions the conviction and raises doubts over a stable government and policy-making styles. "These doubts openly question the notable premium of Indian equities versus history, compared to bonds,  the near-record premium of SMIDs, and the recent re-rating of Modi stocks," it said.

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Recognising the uncertainties, CLSA stated it has replaced Larsen & Toubro (L&T) from CLSA's India focus portfolio with HCL Tech. L&T has been in the brokerage's portfolio since its inception in January 2021. While ITC remains CLSA's preferred staple name. Private banks, IT, insurance, and commodities are among brokerages' preferred sectors.

CLSA noted that its exposure to Modi stocks is limited to ONGC and Reliance as these have re-rated by less than 15% in the last six months. We fear de-rating in the expensive discretionary and capex space and prefer the valuation support in private banks.

What lies ahead of Modi stocks? Here's what CLSA says

Earlier, CLSA had earmarked 54 F&O stocks as liquid Modi stocks given their perceived direct leverage to PM Modi’s key policies which included PSUs, capex-linked plays, telecom stocks hoping for tariff hikes, and travel plays.

Despite selloff on D-Street, CLSA in its report noted that the index of Modi stocks has risen 34 per cent in the last six months versus only 9 per cent for the Nifty and 8 per cent for non-Modi F&O stocks.

"A big proportion of this up move in Modi stocks has been led by a material re-rating in earnings multiples. This was another sign of rising conviction on predictable supply side policymaking and reforms going into the event, which appears very vulnerable now," the report added.

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