Broking house CLSA has tweaked its model portfolio, increasing the weightage of India's leading software exporter TCS and domestic drugmaker Lupin, as these companies are expected to benefit substantially from a depreciating rupee and recovery in the US economy.

It has also removed India's largest government-owned bank State Bank of India from its model portfolio and reduced the weightage of India's largest private bank ICICI Bank. The brokerage house has also cut the weightage of the country's secondlargest software exporter Infosys.

CLSA thinks that the Indian IT sector is in a sweet spot as growth is rebounding due to recovery of the US economy, along with a weakening rupee, implying potential gains for companies like TCS.

In fact, TCS has the potential to become India's first company to reach $100 billion in market capitalisation because it has superior execution skills and growing market share in global IT markets.

The company is on track for midteens revenue growth, which is faster than the industry average, with its stock remaining the best pick in the medium to long-term horizon, the report added.

CLSA has also increased the weightage of India's leading domestic drugmaker Lupin, which is likely to post growth in its key markets the US, India and Japan.

In the recently-held analyst meet in Mumbai, the Lupin management said that it expects compounded growth at 22% over fiscal 2013 to 2015. New drug launches and a weak rupee are likely to boost Lupin's prospects in the US.

The brokerage, in its recent report, held a high-conviction 'Buy' on the stock. However, CLSA has removed SBI from its favoured list. The brokerage house had earlier pruned earnings estimates for the banking sector by 11% to 14% over fiscal 2014 to 2016, citing slowing growth and high interest rates. PSU banks are most vulnerable due to their higher exposure to small and medium enterprise and riskier segments such as infrastructure, besides rising staff costs.

"The higher interest rates and slowing GDP growth imply declining loan growth and rising NPAs in the banking system, particularly in the cheap state-owned banks. Current Indian gross NPAs are at 3.7% of total loans, but there is also another 4.6% of loans which are in the restructured category," said Christopher Wood, chief equity strategist at CLSA, in an interview to ET.


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