Christopher Wood, the global head of equity strategy at Jefferies Group, has reiterated his “bullish” view on Indian equities even as other global research and brokerage houses downgraded them citing “rich valuations”, Business Standard reported.
In his latest weekly note to investors titled “GREED & fear”, Wood said 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 10 years, and not be able to sell it during that period, that market would be India,” Wood wrote.
Jefferies beliefs rising interest rates will not derail the upcoming investment cycle and from a macro perspective, India looks to be in a similar condition as 2003 when it embarked on the last property and capex cycle.
According to Jefferies’ analysts, the 10-year bond yield rose from 5 percent (2003-04) to 8-9 percent over several years without impacting the then investment cycle. Wood thus believes this will help keep the equity market buoyant.
“Any sell-off in Indian equities triggered by tapering or 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, Wood has also reduced exposure to gold in his Asia ex-Japan portfolio by 5 percent in favour of Bitcoin, it added. The move is being viewed as the cryptocurrency being a better option when hedging against inflation, reports noted.
This is the first time Jefferies has cut exposure to gold and added to the 5 percent already allocated to the top cryptocurrency in December 2020. The additional 5 percent worth around $22,000 comes after Wood in April said he was “extremely bullish” on the crypto due to monetary easing and said it was “investable for institutions”.
In his note, Wood also said he is not giving up on gold yet, but “it is risky for ageing gold bugs to ignore the reality that Bitcoin is a competitor to gold as a store of value”. On Ethereum he said it is not a store of value asset, but it is likely to continue to outperform Bitcoin in the coming months, reports said.
"The arrival of the Bitcoin ETF (exchange traded fund) in America, and the growing mainstream acceptance of crypto, means that it is timely to make a further adjustment to the global portfolio for US-dollar denominated pensions funds which was set up at the end of 3Q02 (third quarter of 2002) as a way of hedging the risk of the collapse of the US Dollar paper standard. In this respect, the performance of gold this year remains hugely disappointing given how negative rates are in America,' he stated.
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