How Budget, RBI policy made Jefferies change its India stock portfolio

“Our finance team is now incrementally positive on non-bank lenders as the rate hike cycle nears its end,” Jefferies’ Mahesh Nandurkar said, adding that they dumped ICICI Pru Life due to regulation change pressure.

The brokerage also reduced weights on

and . “We remove Container Corp (no near-term divestment pressure) and add weight to L&T (capex play). Other changes include exit from (peaking discretionary spend growth) and bringing to neutral,” it said.

Jefferies has a target price of Rs 6,159.50 on Bajaj Finance and Rs 781.10 on

Finance.
After the recent pullback in Nifty, Jefferies said the risk-reward is improving and a large underperformance by the Indian market is unlikely.

“Nifty now trades at 18.5x 1-yr forward PE or a 7% premium to 10-year avg. and valuation gap vs China is also now back to the 10-year avg. This makes us more optimistic on the market outlook,” it said, adding that the trends were positive in the Budget and Q3 earnings.

Part of the Indian underperformance was also driven by the relatively high valuations. “The sharp underperformance though has meant that on a 1-year forward PE basis, Nifty’s premium to China (HSCEI) is now in line with the 10-year average,” it said”The markets have also taken support from the reasonably strong Dec-quarter results season, with the Nifty earnings estimates for FY23/24 largely unchanged so far. Strong earnings from lenders and autos have been the key support,” Jefferies said.

After yesterday’s 25bps rate hike by RBI, Jefferies analysts believe that we may be 25 bps away from the peak which is a positive for NBFCs.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)