The weightings in ICICI Bank, State Bank of India (SBI), REC and Coal India will be reduced by one percentage point each, while an investment in PolicyBazaar will be introduced with a 4% weighting, Wood wrote in his GREED & fear newsletter.
As for the Asia ex-Japan long-only portfolio, the investment in JSW Energy will be increased by one percentage point by shaving the investment in SBI.
Wood said there will be a temptation for investors to tilt portfolio more towards consumption plays, relative to investment plays, on the view that the new government will focus more on populist measures whereas a feature of the past 10 years has been a fiscal deficit driven by spending on physical infrastructure rather than transfer payments. The obvious possibility here is measures to revive the rural economy, he said.
Also read | Sensex may hit 1 lakh before 5 years, thinner Modi 3.0 doesn’t mean end of bull run: Mark Mobius
Foreign investors will, however, view any significant correction as an opportunity to add since a combination of India’s outperformance in recent quarters and high valuations, most particularly in the midcap space, has meant that most dedicated emerging market investors are no longer overweight the market.
FIIs have been net sellers of Indian stocks year-to-date and have sold around $4 billion of Indian equities so far in 2024, after buying a net $21.4 billion in 2023.
The India bull has warned that the risk of further corrections remains greatest in the midcap space given that the Nifty MidCap 100 Index now trades at 30.7x one-year forward earnings, compared with 19.7x for the Nifty.
Jefferies’ head of India research Mahesh Nandurkar had reduced the weightings to property and public sector banks in his portfolio earlier this week.
“Still GREED & fear’s long-only India portfolio is structural in nature and the base case here remains that India is in a property and capital spending up cycle which will continue,” Wood said.
Earlier, billionaire investor Mark Mobius had told ETMarkets that the bull run is intact and that the Sensex can even hit the 1 lakh mark before Modi finishes his third term.
“We are certainly not at the end of the bull run. See, generally speaking, you can say that if a country is growing at 7%, like India is now growing, the market and earnings of good companies will go up double that, 14-15%. So, you can expect the market index to be rising at that pace over the next 10 years,” he had said.
After ending Tuesday’s session with a 6% loss, Nifty has been rallying non-stop for 3 sessions and was near its exit poll day peak around noon on Friday.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
