The major risk to Indian equities, according to him, is the arrival of a new Covid variant, which he says the country shares with the rest of the world.
Indian stock markets are likely to underperform their global peers in case of a global risk-off triggered by a taper scare, believes Christopher Wood, global head of equity strategy at Jefferies. Yet, he remains structurally positive and has hiked allocation to Indian equities by two percentage points (2 ppt).
Currently, 31 per cent of Wood's Asia ex-Japan thematic equity portfolio for long-only absolute-return investors is in India and includes marquee names such as Reliance Industries (RIL), HDFC, ICICI Prudential Life Insurance, ICICI Lombard General Insurance, Godrej Properties, and ICICI Bank.“GREED & fear remains structurally positive on the Indian market despite the lofty valuation at 21.5 times 12-month forward earnings, which creates certain vertigo,” Wood wrote in his weekly note to investors, GREED & fear.
In July, Wood had launched an India long-only equity portfolio with 16 stocks, which included ICICI Bank, HDFC, Bajaj Finance, RIL, ONGC, Maruti Suzuki India, Tata Steel, and Jubilant FoodWorks.
The major risk to Indian equities, according to him, is the arrival of a new Covid variant, which he says the country shares with the rest of the world. The other risk, according to him, is a change in the Reserve Bank of India's (RBI's) dovish policy.
“To signal the continuing structural bullish view on India, GREED & fear will increase the weighting this week by two percentage points with the money shaved from China and Hong Kong. If India corrects more sharply in an aggravated tapering scare, the weighting will be added to. Meanwhile, China would be a natural outperformer in a tapering scare were it not for the continuing regulatory noise,” Wood said.
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