Foreign investors' positions on India light, may buy on corrections: Jefferies

On Nifty earnings growth expectations, the analysts said that the estimates are around a strong 19 percent for FY24.

Foreign investor positioning on India is light and hence corrections will likely get bought into, wrote Jefferies' analysts in their Asia Pacific report.

They believe that India’s economic outlook is 'robust' with around 7 percent multi-year GDP growth likely since the broader capex cycle is in the early stages. The analysts estimate Nifty earnings growth to remain around 15 percent for FY25.

Given these, the brokerage's analysts believe foreign investors are likely to buy on dips.

In November 2023, FII's India holdings had hit a decadal low.

On December 15, FIIs/FPIs were net buyers with the net value of trades executed by the segment at Rs 9,239.42 crore as the benchmark indices closed at a new high. They bought shares worth Rs 37,677.58 crore and sold shares worth Rs 28,438.15 crore.

The brokerage's Indian strategy team likes domestic cyclicals such as banks, power, telecom, industrials and property; while they are cautious on IT, consumer and RIL.

Their Quant team also prefers value and small caps, wrote the analysts.

Overall, the brokerage's view is that central banks will be growth supportive in 2024. For Asia, the additional positive is the depreciating dollar, which "signals the return of animal spirits, though somewhat tempered by a slowing US" it said.

The periodic note, termed Greed & Fear, released by Jefferies' global head of equity strategy Chris Wood stated the base case to be a downturn in the US in 2024. According to the note, the US dollar has peaked while the yen may have bottomed.

In an earlier report, the brokerage had given the various positives expected to come for India, such as a multi-year capex cycle unfolding, political continuity and margin improvement supporting earnings growth.

In its December 4 report on India's capex cycle strategy, the brokerage said, "India's capex (GFCF) to GDP ratio bottomed out in FY20 and has since risen by 270bps but it's still 50-600bps lower than the previous peak seen around 2010. All the three elements of the capex cycle (housing, corporate capex & govt capex) are now firing and hence the potential global slowdown should have limited impact on India."

On Nifty earnings growth expectations, the analysts said that the estimates are around a strong 19 percent for FY24 "driven by better than margin improvement" in autos and better net interest margins for financials.