Chris Wood of Jefferies cuts stake in 3 PSU stocks as PM Modi faces coalition challenge
Prime Minister Narendra Modi can operate effectively in a coalition government in his third term, Chris Wood of global brokerage firm Jefferies has shaved weightage of PSU stocks in his long-only India portfolio.
The weightings in ICICI Bank, State Bank of India (SBI), REC and Coal India will be reduced by one percentage point each, while an investment in PolicyBazaar will be introduced with a 4% weighting, Wood wrote in his GREED & fear newsletter.
As for the Asia ex-Japan long-only portfolio, the investment in JSW Energy will be increased by one percentage point by shaving the investment in SBI.
Wood said there will be a temptation for investors to tilt portfolio more towards consumption plays, relative to investment plays, on the view that the new government will focus more on populist measures whereas a feature of the past 10 years has been a fiscal deficit driven by spending on physical infrastructure rather than transfer payments. The obvious possibility here is measures to revive the rural economy, he said.
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Foreign investors will, however, view any significant correction as an opportunity to add since a combination of India’s outperformance in recent quarters and high valuations, most particularly in the midcap space, has meant that most dedicated emerging market investors are no longer overweight the market.
FIIs have been net sellers of Indian stocks year-to-date and have sold around $4 billion
