Jefferies includes three companies in its India-focused long-term holdings, while removing Reliance Industries, Axis Bank, reducing positions in ICICI Bank, REC, and JSW.
In the current financial year (FY25), India has witnessed a significant influx of investments, totalling $21 billion. Approximately $3 billion of this inflow has been through Systematic Investment Plans (SIPs) each month, according to recent reports.
Among the latest additions to Jefferies' India long-only portfolio are Ambuja Cements, Le Travenues Technology (Ixigo), and Lemon Tree Hotels. Each of these stocks has been assigned a 4% weight in the model portfolio.
Jefferies views the current market phase as a healthy consolidation in India. This perspective is shared by Jefferies analyst Mahesh Nandurkar, who has analysed the market and predicted that the Indian stock market will move into a consolidation trend and likely remain almost flat for the rest of the year.
The base case, as outlined by Jefferies' head of India research, is that the market will likely trade sideways for the rest of the year. This prediction is based on the impressive compound annual growth rate achieved by the Indian stock market over the past 22 years, which has led to high expectations among investors.
However, it's important to note that the Sensex has only seen an annualized return of 17% since the start of 2003 to the end of 2024. This is compared to an annualized return of 11.2% for the S&P500 over the same period.
The model portfolio maintained by Jefferies currently has Adani Ports & SEZ and SBI Life Insurance holding the highest weights at 6% each. Other stocks with a 5% weightage in the model portfolio include DLF, Macrotech Developers, Bharti Airtel, and PB Fintech.
Interestingly, ICICI Bank, REC, and JSW Energy have had their allocations in the model portfolio reduced by one percentage point each. Notably, Reliance Industries and Axis Bank have been dropped from the model portfolio.
Seven months after a speech about greed and fear, the Sensex is up "only" 11.8% on a total-return basis, according to Jefferies. This call was made after the Sensex had already declined by 12.8% from the peak reached last September.
MSCI India currently trades at 22x forward earnings, or 25x if financials are excluded. This indicates a relatively high valuation compared to other global markets, but the ongoing mutual fund inflows are expected to continue to absorb equity supply.
In conclusion, while the Indian stock market may see a period of consolidation, the ongoing mutual fund inflows suggest a robust market that continues to attract investors. The addition of new stocks to the Jefferies' model portfolio, such as Ambuja Cements, Le Travenues Technology (Ixigo), and Lemon Tree Hotels, further underscores the potential for growth in the Indian market.
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