Chris Wood launches India-dedicated equity portfolio with 16 stocks

The portfolio includes marquee stocks such as ICICI Bank, HDFC, Bajaj Finance, and Reliance Industries

After hiking stake earlier this year to Indian equities to 14 percentage points (ppt) in his Asia ex-Japan long-only portfolio, Christopher Wood, global head of equity strategy at Jefferies has launched India long-only equity portfolio with 16 stocks, which include marquee stocks such as ICICI Bank, HDFC, Bajaj Finance, Reliance Industries (RIL), ONGC, Maruti Suzuki India, Tata Steel and Jubilant FoodWorks.

India always had a significant representation in GREED & fear’s long-only Asia ex-Japan portfolio, launched nearly 19 years ago at the end of third quarter of 2002 (Q3-2002). The move comes despite the Indian equities nearing all-time high levels and rich valuations.

“This is certainly not a perfect time to start an Indian portfolio since the Sensex is near an all-time high though, for that matter, so are many other stock markets. Still GREED & fear remains convinced that India is at the start of a new housing cycle after a seven-year downturn, after the mother of all consolidations in the developer industry, which is why there will be a 17 per cent weight in the property sector,” Wood wrote in his weekly note to investors, GREED & fear.

This portfolio, Wood said, will be domestic demand focused, though it will have a decent energy weighting to hedge, in part at least, the obvious risk of a higher oil price on Indian financials and other interest rate sensitive sectors.

Besides Wood, other research and broking houses have started to express their concerns about the valuation of Indian equity markets. "After a sharp run up from their March 2020 low, the valuation of Indian stock market has become a concern now," HSBC said in their Asian outlook conference for the second half of 2021, while maintaining a ‘neutral’ rating on Indian equity markets.

“The valuation of Indian stock market appears expensive now. Last year, India got a good share of flows from north Asian regions. Besides, Covid third wave still remains a risk for the country,” said Herald van der Linde, head of equity strategy for Asia Pacific at HSBC.

The S&P BSE Sensex and Nifty50 logged their best financial year performance in a decade and surged 68 per cent and 71 per cent, respectively in FY21. In the last six months, the mid-and-smallcap segments have outrun their large-cap peers with a gain of 26 per cent and 39 per cent, respectively. In comparison, the S&P BSE Sensex and the Nifty50 have rallied around 10 per cent and 12 per cent, respectively during this period.

 

Meanwhile, Wood's Asia ex-Japan long-only thematic portfolio has risen on a total-return basis by 3,266 per cent in US-dollar terms since inception at the end of Q3-2002, compared with a 746 per cent increase in the MSCI AC Asia ex-Japan Index and a 669 per cent increase in the S&P500.

“This means the portfolio has risen by an annualised 20.6 per cent since inception, compared with an annualised 12.1 per cent increase in the MSCI AC Asia ex-Japan Index and an annualised 11.5 per cent gain in the S&P500,” Wood said.