Vivid News 24: In its revamped India model portfolio, Jefferies has given Larsen and Toubro (L&T), Reliance Industries Ltd (RIL), and Banks more weight than Bharti Airtel, Zomato, and Maruti Suzuki.
The brokerage has dropped Zomato and Bharti Airtel and added Tata Steel and Hindalco, two Indian metal stocks, to its India model portfolio, increasing the weight of the materials sector from Nil to Neutral because it thinks that the reopening of China and the US rate peak will lead to prolonged positive sentiments on metals.
Funding for the same is obtained in part by selling Zomato and eliminating cash from the portfolio. Because its main rival, Swiggy, has recently experienced a loss in market share, analysts at Jefferies are gradually leery of a potential increase in competitive activity in the sector about the latter tactical maneuver.
Additionally, it has shifted some weight away from Maruti, which could be a hindrance to discretionary spending because of slower wage increases and IT recruiting.
“We remove Bharti Airtel from our model portfolio since our analyst raises concerns about increased 5G CAPEX, which are probably not going to be offset by rate increases shortly. L&T, which continues to generate double-digit order growth, benefits from the improvement in the broader CAPEX cycle, including the housing market.
As a result, we add weight to the company and upgrade the firm’s sector placement to Overweight for the Industrials. The profitability of RIL’s main O2C business may increase as a result of China’s openness, according to the international brokerage (petchem margins at 12-year lows on weak China).
“China’s COVID reopening currently seems to be proceeding, as the government works to loosen COVID limitations. However, from their lows on October of 22, the Chinese stock markets have increased by 34%. The reopening of China should have a big worldwide influence in 2023, with the demand for commodities (metals, oil, etc.) expected to stabilize or increase, it continued.
According to Jefferies, its model portfolio outperformed Nifty by 209 basis points between January and October 2022. Since then, though, it has underperformed in the fourth quarter as it raised capital and the performance of metals and automobiles changed.