TCS recently reported its results for the June quarter, which were in-line with the already subdued expectations and the stock has declined over 35% so far this year.
However, Kotak has clarified with regards to the TCS inclusion, stating that this move does not indicate any sort of endorsement for the Indian IT sector and that they continue to remain “underweight” as they have been since a long time.
Kotak’s note went on to state that the inclusion of TCS merely is reflection of their discomfort with the large “underweight” on the IT sector and “inexpensive valuations.”
TCS will command a weightage of 150 basis points in the model portfolio of Kotak. Besides TCS, the brokerage has also included SBI Life with a weightage of another 150 basis points, while the weightage of Larsen & Toubro has been increased by 100 basis points to 400 basis points.
In order to balance the recent inclusions, Kotak has moved its 160 basis points investment in ICICI Prudential Life to the Midcap Portfolio, while Mankind Pharma, which had a 140 basis points weightage, has been removed.
Additionally, positions in DLF have been trimmed by Kotak to 30 basis points from 150 basis points earlier, while that of GMR Airports has also been trimmed to 70 basis points from 160 basis points based on their recent outperformance.
While ICICI Prudential is the only largecap to midcap move, Kotak Institutional Equities has also included CRISIL and DCB Bank in the list.
To balance these three inclusions, Dixon Technologies, Dr. Lal Pathlabs and Info Edge have been removed, courtesy of their recent strong performance over the last one to three months, resulting in limited upside potential.
