Jefferies’ Wood Realigns India Portfolio: MCX & Lenskart In

Christopher Wood, Jefferies’ Global Head of Equity Strategy, has significantly reshaped his India long-only model portfolio, pivoting towards exchange infrastructure and consumer retail. This strategic rebalancing involved divesting major financial holdings in favor of new growth opportunities within the Indian market landscape.

Key Portfolio Adjustments

• HDFC Bank and PB Fintech’s PolicyBazaar were removed from the portfolio.
• New additions include Multi Commodity Exchange of India (MCX) and eyewear retailer Lenskart Solutions, each receiving a 4% weighting.
• REC was replaced by Bajaj Finance, also at a 4% weight.
• The allocation to Eternal (formerly Zomato) increased by one percentage point to 5%.
• Bharti Airtel’s weight saw a corresponding cut of one percentage point, now standing at 4%.

The adjustments reflect a calculated move by Wood, benchmarked against the MSCI India Index. This shift follows substantial gains from previously held positions, with REC delivering a remarkable 228% increase since December 2022 and Bajaj Finance advancing 49% since its removal in January 2024.

India’s Economic Undercurrents

This portfolio reshuffle unfolds against a complex backdrop of India’s mixed equity performance, where domestic strength contrasts with foreign investor trends. While overseas investors bought a net $2.45 billion of Indian stocks in July, year-to-date net foreign selling still totals $25.4 billion.

• Indian bank credit growth accelerated to 17%-18%, marking the fastest pace in over a decade.
• Corporate lending expanded at 20%, agricultural loans at 17%, and retail credit at 16%.
• Healthy demand persists in the automobile and property sectors, according to Wood.
• Capital inflows provide a buffer, with a Reserve Bank of India program attracting $41 billion in foreign currency deposits from NRIs by July, projected to reach $80 billion to $100 billion.
• Foreign investors have also injected a net $8.7 billion into Indian government bonds since June, bolstering the rupee due to recent tax changes.

The Reserve Bank of India has maintained its policy rate for the fourth consecutive meeting, signaling a neutral stance. Jefferies’ India research head anticipates only one quarter-point increase within the current tightening cycle, suggesting a stable monetary environment supporting these strategic shifts.

Wood’s revised model portfolio, established in July 2021 to achieve one-year outperformance and long-term absolute returns, now places its highest individual weightings of 6% each on SBI Life Insurance, Adani Ports & Special Economic Zone, and GMR Airports. This ongoing re-evaluation underscores a dynamic approach to capitalizing on India’s evolving economic landscape.