While the second wave of covid-19 continues to wreak havoc across the nation, Dalal Street has remained resilient. The NSE Nifty-50 index is down just 3.4% considering the fact that the middle of February even though the everyday new case count continues to surge larger. Seeing this strength in the marketplace, coupled with other basic motives, Chris Wood, Global Head (equity approach) at Jefferies has decided to raise India’s weightage in his Asia Pacific ex-Japan relative-return portfolio. Chris Wood had trimmed India’s weightage at the finish of the preceding quarter when instances began to raise quickly.
With the vertical rise in instances, lockdowns are back on the cards which pose a danger for asset high-quality. “The renewed restrictions on activity also raise again the potential risk of a renewed deterioration in asset quality for the banking sector,” Chris Wood mentioned in his weekly GREED & worry newsletter. However, the marketplace strategist added that any marked pullback in India’s high-quality private sector banks is a obtaining chance.
Private banks stay eye-catching
Private bank stocks saw a robust rally right after hitting a low in March last year. The Nifty Private Bank Index has risen by 112% considering the fact that the finish of March 2020. Chris Wood highlighted that top private lender such as HDFC Bank and ICICI Bank are down 10% and 9% from their 2021 highs reached in February.
Four of the biggest private sector banks, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank, have seen their share of deposits develop from 11% in FY2011 to 21% in FY2021. This, Wood says, presumably reflects a flight to high-quality offered troubles in current years surrounding the likes of Yes Bank and other smaller sized lenders.
Housing marketplace recovery only delayed
Earlier in January this year, Chris Wood had mentioned that in the post-pandemic world, India’s housing sector will see a recovery. Now, he says that a sustained housing recovery in India will not finish with the second wave but will only be delayed. The house marketplace is anticipated to boom with a cyclical recovery post-pandemic. Sales volumes in the Indian housing marketplace peaked in 2013 and continued to stay weak right after reform such as GST and RERA. Jefferies Jefferies India house analyst Abhinav Sinha has predicted residential house sales to almost double on-year basis in 2021.
Chris Wood will raise India’s weightage by 2 percentage points to 14% from the existing 12%. This will come at the expense of China and Malaysia. With this, India’s weightage will be back to exactly where it was last quarter.
Covid predicament remains grim
The second wave of the coronavirus pandemic continues to stay harsh for India. Strict lockdown measures have now been in spot at locations such as Maharashtra and Delhi. Owing to such measures, the Jefferies Recovery Tracker for India has fallen by 12ppts from the peak of 103% in February to 91% last week or the lowest level considering the fact that September 2020. The vaccine roll-out continues to progress but is nevertheless far behind the curve.