Jeremy Grantham’s GMO revs up bullish bets on ICICI Bank, Infosys

Jeremy Grantham, co-founder and chief investment officer of Grantham, Mayo and van Otterloo, has revved up his bets on ICICI Bank and Infosys in the quarter ended December, the Boston-based asset management firm’s 13-F filings showed.

The increase in holding of India-linked stocks is in-line with Grantham’s recent view of shifting funds out of US equities and towards emerging markets. In a newsletter in January, Grantham had warned investors of a ‘superbubble’ in US equities and suggested a shift towards value stocks in Japan and emerging markets.

GMO added 308,300 American Depository Receipts of ICICI Bank to take its holding to 334,900 ADRs in the December quarter. The asset manager also added 582,000 ADRs of information technology major Infosys to increase its overall holding to 2.2 million ADRs.

GMO’s increase in holding in the private sector bank comes amid continued optimism for the lender in the domestic market. ADRs of ICICI Bank have risen close to 5 percent in the quarter ended December, which was slightly lower than the 5.6 percent gains seen in the locally listed shares of the lender.

Brokerage firm CLSA India had called the bank “best in class” after its December quarter earnings, which saw the lender’s net profit rise 25 percent on-year. “The bank continues to deliver high growth and profitability, deserves premium multiples and should not be benchmarked to its past cycles,” CLSA India had said in January.

Meanwhile, Grantham continues to see value in Infosys even though foreign investors in the locally listed shares of the IT major don’t. Where Grantham has increased his ADR holdings of Infosys by 36 percent in the December quarter, foreign institutional investors reduced their stake by 29 basis points to 33.17 percent in the domestic stock.

Nonetheless, Infosys continued its outperformance in the December quarter as the ADRs of the company jumped 14 percent outperforming the NASDAQ Composite index, which rose 8 percent in the same period. The locally listed shares rose 13 percent in the December quarter as against Nifty 50’s 1.5 percent fall.

Infosys’ shares have come under pressure since the turn of the year in line with broader correction in global technology stocks amid expectations of aggressive increase interest rates by global central banks.

Brokerages, however, remain optimistic on the company given its strong revenue growth guidance and commentary on the demand environment. Of the 44 analysts that cover the stocks, 40 have a positive view on the stock for the next 12 months.