India Portfolio: Bernstein gives 13 Bottom-up ideas for the rest of the year
Sector portfolio: Bernstein remains overweight (OW) on Financials but allocates a small part of the weight to utilities. It is now neutral on utilities. It also maintains an overweight on consumer tech with an overall IT sector with a modest OW position and remains OW on building materials.
Meanwhile, it is underweight (UW) on staples, equal-weight (EW) on Autos, and overall discretionary, and UW on Metals. "Our current view on broad markets is to buy the corrections that will happen given the quick run-up from April. We see limited large downside risk due to supportive macro, resilient earnings growth, and lower risk in the broader corporate ecosystem," it forecasts.
Stocks portfolio: The brokerage has added NTPC and Paytm while removing Reliance and SBI from its portfolio. It has also retained HDFC Bank and Axis Bank in Financials, Infosys in IT, Delhivery, and Zomato in consumer tech. Biocon is retained in Healthcare, L&T in Industrials, and UltraTech in Cement.
NTPC: The brokerage has a simple 4-point thesis on NTPC: 1) Thermal: Evening power shortages are on the rise in India. The solution to this is to add more thermal power - and NTPC is only the large player leading new investment in this space. 2) Renewable capital intensity: Renewables (RE) require 2-3x the capex of a thermal plant, and an operating renewable plant does not throw enough cash to fund a new one (first 12 years of debt servicing).
Hence, cash flow from the coal plants of NTPC (10x of Renew + Adani Green in FY25) will be 'super-critical' to meet India's 50GW/yr renewable capacity addition plans. 3) Renewable - cost of capital and receivable advantage: NTPC has a borrowing cost of 6-7 percent compared to 9-10% for most private players. In a business
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