Jefferies Adjusts India Portfolio: Adds MCX, Lenskart, Bajaj Finance

Global rating agency Jefferies has significantly reshuffled its India long-only equity portfolio, exiting HDFC Bank, PolicyBazaar, and REC. The firm has replaced these with Multi Commodity Exchange of India (MCX), eyewear retailer Lenskart Solutions, and Bajaj Finance.

Portfolio Adjustments

The updated portfolio now allocates 4% each to Bajaj Finance, MCX, and Lenskart. Eternal’s weighting has been increased by one percentage point, reaching 5%.

• Bajaj Finance: 4% allocation
• MCX: 4% allocation
• Lenskart: 4% allocation
• Eternal: weighting increased by 1% to 5%
• Bharti Airtel: allocation reduced to 4%

These strategic adjustments are driven by Jefferies’ more constructive outlook on India’s domestic growth. The brokerage highlights several positive factors supporting this shift.

Accelerated Bank Credit and Domestic Demand

Bank credit growth has accelerated, reaching 17-18% year-on-year, marking its strongest pace in over a decade. Corporate lending is a primary driver of this expansion.

• Corporate lending growth: approximately 20% year-on-year
• Agriculture credit expansion: 17%
• Retail credit expansion: 16%

Healthy demand in the automobile and property sectors also contributes to the positive domestic economic outlook. These sectors indicate robust consumer and investment activity.

Robust Capital Inflows and RBI Measures

India recorded net foreign equity inflows of $2.45 billion in July, benefiting from the unwinding of the ‘memory trade’. This occurred despite cumulative foreign selling of $25.4 billion year-to-date.

Furthermore, the Reserve Bank of India’s (RBI) scheme to attract foreign currency deposits from non-resident Indians has generated substantial inflows, totaling around $41 billion so far. Expectations are for these inflows to reach between $80 billion and $100 billion before its closure on September 30.

Foreign investment in Indian government bonds has also contributed approximately $8.7 billion since June, following the introduction of tax-free interest income on such investments. This has bolstered the bond market.

Rupee Recovery and Monetary Policy

The combination of robust capital inflows and RBI measures has improved the outlook for the Indian rupee. The currency recovered to around 95.17 against the US dollar after touching 96.96 in May.

The RBI’s Monetary Policy Committee (MPC) has maintained its benchmark repo rate at 5.25% for the fourth consecutive meeting, retaining a neutral stance. Jefferies anticipates only one more 25-basis-point rate hike in the current tightening cycle.