HDFC Bank, Reliance Industries, Zomato, and REC have been excluded from Bernstein's portfolio stocks as its report revealed 11 bottom-up ideas. The December quarter is expected to remain weak on earnings and macro basis.
"The portfolio is largely constructed with our view of bottoming and the need to invest in select growth opportunities," the brokerage said, adding that while small and mid caps are still in a bubble, it has introduced a few stocks in its main portfolio to invest in sector-specific themes.
In the industrial sector, Adani Ports has been reintroduced following a correction after having realised profits last year, presenting it as a more attractive opportunity, the brokerage said. Given the secularity of the telecom sector where it is 'overweight', Bharti has been reinstated following recent corrections.
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Among other additions are Jubilant FoodWorks and IndusInd Bank. While, DMart, ICICI Bank, and NTPC continue to remain a part of its holdings.
"Notable exclusions, such as HDFC Bank and Reliance, allow us to focus more on capitalizing on recovery prospects rather than primarily mitigating downside risks, although we maintain a positive outlook on both entities," Bernstein said.
The brokerage expects a 12% return for the Nifty 50 index this year but it continues to consider SMIDs in a bubble phase aided by domestic flows and forced investing. "Almost every stock is overvalued," it noted. "However, we are not expecting domestic flows to correct, materially forcing funds to remain invested."
"Looking at the big picture, our recent reports forecast a potential rebound in macro trends and earnings in the year's first half," the brokerage said. "Despite short-term weakness, we don't anticipate drastic drops for Nifty, but we expect a recovery in the latter half of the year with macro recovery and new growth drivers."
The brokerage noted that the need to churn the portfolio is a bit more than the usual quarterly changes as it sees opportunities for investing to emerge, given the broader market volatility.
Among sectors, it has increased its allocation in IT services and selected consumer sectors.
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