Any sell-off in Indian equities is a good time to buy: Chris Wood

 Christopher Wood, global head of equity strategy at Jefferies reiterates his bullish view, remains structurally overweight on India, and would look to buy Indian stocks on every decline

At a time when most marquee global research & brokerage houses such as UBS, HSBC, Nomura and Morgan Stanley have downgraded Indian equities citing their rich valuation, Christopher Wood, global head of equity strategy at Jefferies has reiterated his bullish view. He remains structurally overweight on India, and would look to buy Indian stocks on every decline.

“If GREED & fear had to own one stock market globally for the next ten years, and not be able to sell it during that period, that market would be India,” Wood wrote in his latest weekly note to investors GREED & fear.

The key point which GREED & fear agrees with is that India, from a macro perspective, looks in a similar condition to where it was in 2003 when the country embarked on the last property and capex cycle. Rising interest rates, Jefferies believes, will not derail the upcoming investment cycle. The 10-year bond yield, according to Jefferies' analysis, rose from a low of 5 per cent during the 2003-2004 period to 8-9 per cent during the next several years without impacting the then accelerating investment-led cycle. All this, they believe, will be the case now as well and will help accelerate growth. This in turn, he believes, will help keep equity markets buoyant.

“Any sell-off in Indian equities triggered by tapering / tightening scare on Wall Street will provide opportunities to add to Indian equities, most particularly if this coincides with a further likely rise in the oil price on an accelerating re-opening of the global economy,” Wood wrote.

Meanwhile on Thursday, Morgan Stanley downgraded Indian equities from ‘overweight’ (OW) to ‘equal-weight’ (EW) and recommended taking some money 'off the table'. The research & brokerage house maintained a 50 basis points (bps) overweight stance on the Indian market its Asia Pacific (ex-Japan) and Emerging Market portfolio. However, India’s outperformance this year vis-à-vis the EM peers, according to Morgan Stanley, prompted them to downgrade India to a neutral stance.