Jefferies has reassembled its portfolio of Indian models where global brokers have shifted weight from Bharti Airtel, Zomato and Maruti Suzuki to Larsen and Toubro (L&T), Reliance Industries Ltd (RIL) and Banks.

The brokerage has removed Zomato and Bharti Airtel and has added two Indian metals stocks Tata Steel and Hindalco to its model India portfolio, bringing the material sector’s weight to Neutral from currently Nil on the belief that China’s reopening and a peak in US interest rates could boost the extended positive sentiment. on metal.

Funding the same in part by getting the cash out of the portfolio and leaving Zomato. As for the latter tactical move, analysts at Jefferies are increasingly wary of a potential increase in competitive activity in the sector as its main competitor, Swiggy, has recently been losing market share. This also reduces the weight from Maruti (potential headwind to discretionary consumption due to slower wage increases/IT hiring) to banks.

“We are removing Bharti Airtel from our model portfolio as our analysts highlight concerns about increased 5G capex, which is unlikely to be offset by increased tariffs in the near future. The improvement in the broader capex cycle, including housing, is positive for L&T, which continues to post double-digit orders growth, and we are adding weight to stocks, pushing our Industrials sector position to Overweight,” the note states.

Global brokers also add weight to RIL as the profitability of O2C’s core business may improve on China’s reopening (petchem margins at 12 year lows due to weak China).

“China’s covid-19 reopening now appears to be finally underway as the government pursues relaxation of COVID restrictions. Nonetheless, China’s stock market has risen by 34% from its October 22 lows. China’s reopening should have a significant global impact in 2023, with commodities (metals, oil, etc) likely to see stability/upward demand movement,” he added.

Jefferies said his portfolio of models had outperformed Nifty by 209 bps over January – October 2022. But since then, it has underperformed in the fourth quarter due to increased cash and metals performance and automatic reversals.

The views and recommendations made above are those of the respective analysts or brokerage firms, and not of Mint.


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