Jefferies' Chris Wood adds REC to his portfolio, reduces exposure to Bajaj Finance
As the market consolidates, money managers have started shuffling their portfolios. After Jefferies moved Zomato out of the India model portfolio in favour of metals, its Global Head of Equity Strategy also made some changes.
In the India long-only equity portfolio, Chris Wood added REC Limited, formerly Rural Electrification Corporation, with a 4 percent weighting. He did this by shaving investments in HDFC Bank, Bajaj Finance, ICICI Prudential Life Insurance and ICICI Lombard General Insurance by one percentage point each.
Apart from the names mentioned above, the India long- only portfolio holds ICICI Bank, SBI, CAMS, Reliance Industries, ONGC, Godrej Properties, Century Textiles, DLF, Macrotech Developers, Maruti Suzuki, L&T, Adani Ports and Concor.
Besides, Woods also cut exposure to Bajaj Finance in the Asia ex-Japan long-only portfolio. With this step, the total allocation to Indian equities came down to 36 percent from 37 percent. India still remains the biggest allocation in the portfolio.
Bajaj Finance has been under selling pressure recently. Other analysts, too, have trimmed their outlook for the stock.
Japanese equities to become attractive?
Earlier this week, the Bank of Japan (BoJ) said it would allow fluctuations of the yield on the 10-year benchmark Japanese government bond (JGB) in a wider range of +/- 0.50 percent instead of the current +/- 0.25 percent. The market is reading the move as the first step towards normalisation.
Wood, writing in his weekly newsletter Greed & Fear, said this step will likely make Japanese equities more attractive. Money managers may also have to tweak their allocation accordingly.
“From a stock market standpoint, all of the above makes it ever more likely that Japan is exiting a deflationary era, which means that, sooner rather than later, domestic institutions should, in theory at least, start to think about re-allocating out of yen fixed income into Japanese equities,” said Wood. “This is something they have not done since the Bubble burst in 1990.”
Also read: MC Explains: What does BoJ’s tweak in yield curve control policy mean?
According to him, such an allocation from fixed income to equities should have happened long ago, given that Topix has already outperformed the 10-year Japanese G-Sec by 195 percent on a total return basis since November 2012.
“In GREED & fear’s view, foreigners should be adding to Japan. From a valuation perspective Japan looks attractive, most particularly from a foreign investor’s standpoint, with the yen until recently at its cheapest level in real effective exchange rate terms since June 1969,” he said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.