Jefferies’ latest India strategy reflects a cautiously optimistic stance on the country’s equity market, with supply catching up to the strong domestic demand for equities. Over the past four months, equity supply surged to around $7 billion per month, bringing the cumulative supply for the year-to-date (CYTD) to $60 billion.
This robust supply is expected to persist, even as domestic inflows appear to be nearing their peak. Additionally, the flow of CY24 equities as a percentage of household savings is now approaching OECD levels, suggesting that household participation in the equity market is rising significantly.
Despite this uptick in supply and demand, Jefferies recommended a cautious approach to equities in the near term. Among sectors, the firm maintained a favorable outlook on banks, two-wheelers, healthcare, and telecom, highlighting these as key overweights in its portfolio.
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In response to recent results season trends, Jefferies has raised its rating for the IT sector to 'neutral' by including Coforge in its model portfolio. This adjustment reflected improved economic data from the US and reduced likelihood of steep rate cuts by the Federal Reserve, factors that create a more favorable environment for IT stocks.
Jefferies also downgraded the consumer staples sector to neutral, adjusting its position by reducing weight in Godrej Consumer. The shift comes as Jefferies reallocates resources within the healthcare sector, replacing Apollo Hospitals with Max Healthcare. According to Jefferies, Max Healthcare offered stronger growth potential due to new bed additions and strategic acquisitions, and it is trading at a similar EV/EBITDA valuation as Apollo.
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