The coronavirus pandemic has kept investors on the edge amid concerns over the impact of the crisis on economies as countries took extreme measures including strict lockdowns. Christopher Wood, global head of Equity Strategy at Jefferies, has made some changes to his India portfolio owing to the extended lockdown.
In his weekly 'Greed and fear' report, Wood informed that HDFC Bank and ICICI Bank will be removed from the portfolio and an initial 3 percentage points weighting will be introduced in Kotak Bank.
"This reduces the exposure of the portfolio in Indian private sector banks from eight percentage points to three. India has not really had a negative consumer credit cycle during this period. That is now probably about to change. For reasons of sentiment more than logic, GREED & fear will maintain one bank. But this will be the bank which has the best history of growing through past negative credit cycles and, in an interesting move, approved raising equity capital (subject to approvals) presumably to prepare for troubled times ahead," Wood wrote.
HDFC Life will also be removed, which will reduce the exposure of his Asia ex-Japan long-only portfolio to Indian non-bank financials from 18 percentage points to 14 percentage points.
Meanwhile, an initial 4 percentage points investment will be introduced in Cipla, a manufacturer of hydroxychloroquine among other drugs and an additional 1 percentage point will be added to Reliance Industries' position, taking it to 6 percent.
This increase is primarily as an e-commerce play not as an oil refining play, the report noted. RIL is now 12.7 percent of the MSCI India Index and 13.9 percent of the Sensex, which means that passive funds have to keep buying it, and active managers will be under renewed growing pressure not to be underweight the stock as many of them are, the report explained.
He also added that India remains a great long-term domestic demand story, which is why Facebook founder Mark Zuckerberg wants to be more involved.
As per Wood, a lockdown in India causes more human suffering than the pandemic itself and continuing lockdown makes it inevitable that India will suffer a consumer lending cycle. He added that there is a growing risk of increased forbearance on local lenders.
Earlier this month, Prime Minister Narendra Modi extended lockdown in India till May 3 from April 15 earlier to contain the deadly virus.
In a GREED & fear note from March, Wood had stated that he has hiked China's stake in his Asia Pacific ex-Japan relative-return portfolio post the recent market correction. He also pared stakes in Indian and Korean markets to fund the rise in stake China markets.
China has started to outperform world equities since the start of February in a hope that the worst may be over in the country even as cases outside China surged, he noted.
In his weekly 'Greed and fear' report, Wood informed that HDFC Bank and ICICI Bank will be removed from the portfolio and an initial 3 percentage points weighting will be introduced in Kotak Bank.
"This reduces the exposure of the portfolio in Indian private sector banks from eight percentage points to three. India has not really had a negative consumer credit cycle during this period. That is now probably about to change. For reasons of sentiment more than logic, GREED & fear will maintain one bank. But this will be the bank which has the best history of growing through past negative credit cycles and, in an interesting move, approved raising equity capital (subject to approvals) presumably to prepare for troubled times ahead," Wood wrote.
HDFC Life will also be removed, which will reduce the exposure of his Asia ex-Japan long-only portfolio to Indian non-bank financials from 18 percentage points to 14 percentage points.
Meanwhile, an initial 4 percentage points investment will be introduced in Cipla, a manufacturer of hydroxychloroquine among other drugs and an additional 1 percentage point will be added to Reliance Industries' position, taking it to 6 percent.
This increase is primarily as an e-commerce play not as an oil refining play, the report noted. RIL is now 12.7 percent of the MSCI India Index and 13.9 percent of the Sensex, which means that passive funds have to keep buying it, and active managers will be under renewed growing pressure not to be underweight the stock as many of them are, the report explained.
He also added that India remains a great long-term domestic demand story, which is why Facebook founder Mark Zuckerberg wants to be more involved.
As per Wood, a lockdown in India causes more human suffering than the pandemic itself and continuing lockdown makes it inevitable that India will suffer a consumer lending cycle. He added that there is a growing risk of increased forbearance on local lenders.
Earlier this month, Prime Minister Narendra Modi extended lockdown in India till May 3 from April 15 earlier to contain the deadly virus.
In a GREED & fear note from March, Wood had stated that he has hiked China's stake in his Asia Pacific ex-Japan relative-return portfolio post the recent market correction. He also pared stakes in Indian and Korean markets to fund the rise in stake China markets.
China has started to outperform world equities since the start of February in a hope that the worst may be over in the country even as cases outside China surged, he noted.
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