Jefferies’ Chris Wood keeps India portfolio unchanged despite risk of Wall Street-led correction

Jefferies’ Chris Wood keeps India portfolio unchanged despite risk of Wall Street-led correction

Despite the fear of Wall Street-correlated correction, Chris Wood, Jefferies global equity strategist, will not change his India long-only equity portfolio or adjust India’s weight in his Asia ex-Japan long-only portfolio. “Still GREED & fear is going to stick with the structural story in terms of the Indian portfolio exposures since these are long-term portfolios not tactical benchmark tracking exercises. Affordability measures for Indian homebuyers are also much better than for most countries,” Chris Wood said in his weekly Greed & Fear newsletter. Although Wood had, at the start of the year, pegged India to be an underperformer, he said domestic markets have surprised everyone.

Maintains position despite concerns

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NSE Nifty 50 Index has rebounded by 16.5% since mid-June, while the MSCI India Index has outperformed the MSCI AC Asia Pacific ex-Japan Index by 16.5% since late June. The resilience shown by domestic markets should be viewed as reflecting the strength of the structural story, Chris Wood wrote while reiterating that India remains “by far the best structural story in Asia”.

Economic growth story strong

On the economic side as well, Chris Wood highlighted bright spots even though Jefferies economic activity tracker for India registered its first decline in six months. The Jefferies Recovery Tracker, which compares the current activity level with the pre-Covid level, declined by 1ppt MoM to 122 in July. The drop comes at a time when the Reserve Bank of India (RBI) has undertaken successive rate hikes. Wood also revisited his vies on India’s real estate market adding that it remains resilient. “The main reason GREED & fear remains relatively relaxed about the impact of monetary tightening on growth is continuing evidence of an upturn in the residential property market. In this respect, India is the exact opposite of China with all the positive multiplier effects of a new up-cycle in property after a seven-year downturn which lasted from 2013 to 2020.”

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Real estate prices across seven major Indian cities are rising and activity too is believed to be improving. Property registrations in Mumbai and Delhi in July were 97% and 33% higher, respectively than pre-Covid July 2019 levels, the global market strategist wrote.

“Further evidence of economic resilience and animal spirits is continuing strong GST revenues and buoyant retail sales,” Wood said. India’s GST collections rose by 28% on-year basis to Rs 1.49 trillion in July, the second-highest level ever. The financial sector also gives reasons to be optimistic about India. “Meanwhile the latest quarterly bank results showed a benign combination of rising credit growth and declining NPLs,” he said. Overall the loan growth for the eight listed banks covered by Jefferies Indian rose from 14% on-year basis in the January-March quarter to 18% on-year in the April-June quarter. Gross NPL ratio of the same banks declined to 4.2% in the first quarter down from 5.8% a year ago.