Chris Wood prepares his portfolio for HDFC twins merger, replaces HDFC with HDFC Bank

NEW DELHI: As HDFC Bank and HDFC work to complete their merger, money managers have also started adjusting their holdings to be ready for the outcome. Christopher Wood, Global Head of Equities at Jefferies, has replaced allocation to HDFC in place of HDFC Bank.

“The investment in HDFC in the Asia ex-Japan long-only portfolio will be removed and replaced by an investment in HDFC Bank,” said Wood in his weekly Greed & Fear Newsletter. HDFC Bank now has a 6 per cent allocation in the portfolio.

Among other Indian stocks in the portfolio are Reliance Industries (6 per cent allocation), ICICI Prudential Life Insurance (4 per cent), ICICI Lombard General Insurance (5 per cent), Godrej Properties (5 per cent), ICICI Bank (5 per cent), Bajaj Finance (5 per cent) and L&T (4 per cent). Indian stocks form 40 per cent of the Asia ex-Japan long-only portfolio.

Wood recently said he would raise the allocation to India only if Nifty50 hits a low of 14,000 level, down 14 per cent from current levels.

“In an interview with ET Now, Wood said: “Indian markets have been remarkably resilient despite the correction. Will look to raise India's weightage if the
Nifty corrects to 14,000-14,500….I will add to the positions in my existing portfolio. I remain very bullish on India structurally. This is a year with the monetary tightening going on but in America and India if the Indian market can trade sideways this year for the most of this year that is a very good outcome.”

In the newsletter, Wood said: "the investment in HDFC in the India long-only equity portfolio will also be removed and replaced by an investment in HDFC Bank. “While the investment in ICICI Lombard General Insurance in the India long-only portfolio will be reduced by one percentage point with the money added to HDFC Bank,” he said.

Stocks that have the largest weightage in the portfolio are Reliance Industries and ONGC, both of which have 10 per cent allocation. This also reflects his bullish view on crude oil, which will benefit energy companies.

On oil he said: “It is going higher at least to $150 this year, so obviously, that is a short-term negative for India. The good news for India is being able to buy more oil from Russia at a cheaper price so that is a positive. But fundamentally, there are big structural forces pushing oil higher.”

Deciphering US Data
Wood said it was worth highlighting, in the context of the collapse in the US personal savings rate, that American consumer credit soared in March by the most on record, rising by $47.3 billion, up from $34.1 billion in February.

There was also a record $25.6 billion increase in revolving credit on credit cards in March, while non-revolving credit increased by $21.7 billion. The increase in total consumer credit slowed marginally to $38.1 billion in April, with a $17.8 billion increase in revolving credit and $20.3 billion in non-revolving credit, according to the latest data released on Tuesday.

“This is still the second-highest monthly consumer borrowing on record. As a result, the outstanding consumer credit balance rose to a record $4.567 trillion at the end of April,” he said.

Wood said the most important is the monthly data point, CPI, that comes out on Friday.