• Jefferies has added two metal stocks Tata Steel and Hindalco to its Indian model portfolio
Jefferies has revamped its India model portfolio in which the global brokerage has shifted weight from Bharti Airtel, Zomato and Maruti Suzuki to Larsen & Toubro (L&T), Reliance Industries Ltd (RIL) and banks.
The brokerage has removed Zomato and Bharti Airtel and added two Indian metal stocks Tata Steel and Hindalco to its India model portfolio, taking the material sector's weighting from zero to neutral at present as it believes that China will again Opening up to 0.5% and US rates peak could drive extended positive. Price on metals.
The financing of the same is done partly by removing the cash in the portfolio and out of Zomato. For the latter strategic move, analysts at Jefferies are wary of a possible increase in competitive activity in the sector, as its main competitor Swiggy has seen a loss of market share recently. This has taken some weight off Maruti (potential headwind for discretionary consumption due to lower wage growth/IT hiring) for banks.
“We remove Bharti Airtel from our model portfolio as our analysts express concern over increased 5G capex, possibly not compensated by tariff hikes in the near term. The pickup in the broader capex cycle including housing is positive for L&T, which continues to post double-digit order growth, and we add weight to the stock, prompting our Industrials sector position to overweight," the note said has gone.
Global brokerages have also raised weights on RIL as the core O2C business could improve profitability once China reopens (Petchem margins at 12-year low on weak China).
“China's post-COVID reopening now finally appears to be progressing as the government pursues relaxations from COVID restrictions. Nonetheless, Chinese stock markets have rallied 34% from their October 22 low. China's reopening should have a significant global impact in 2023, with demand for commodities (metals, oil, etc.) likely to see stabilisation/upward momentum."
Jefferies said its model portfolio has outperformed the Nifty by 209 bps in January-October 2022.
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