Jefferies Bets Big On India: Five Reasons Why The Brokerage Is Overweight
Even as global markets stumble amid rising uncertainties, Jefferies is doubling down on India. The brokerage has issued an 'overweight' call on the country, giving five reasons why the country is set to outperform other emerging markets.
While "absolute index performance is difficult to predict, India should emerge as a relative outperformer", Jefferies said in its latest note.
Here is why Jefferies is bullish:
Low Dependence On US And China
India's limited exposure to US and Chinese demand is a key buffer. India's exports to the US stand at just 2.3% of its GDP, even as the US is its largest export partner. Trade surpluses are equally modest, reducing the impact of a hardline US trade policy, Jefferies said.
Softer Tariff Blow
The US has imposed 26% tariffs on Indian goods. But that figure still pales in comparison to the levies imposed on China, Indonesia and Taiwan. In fact, the Indian government has sounded fairly confident about securing more favourable terms under bilateral trade talks with the US, as per the note.
Oil Prices Provide Cushion
With Brent crude sliding nearly 20% year-to-date to around $60/barrel, India, a major net oil importer, is seeing a windfall. Jefferies holds that the decline improves the current account balance, makes up for potential reduction in US trade surplus, and even gives the government a revenue boost from higher fuel duties.
Foreign Investors Underweight On India
Foreign portfolio investors have pulled $27 billion from Indian equities since September 2024. But Jefferies sees this as an opportunity: many EM managers are currently neutral or underweight on India. A reversal could spark a fresh wave of inflows, according to them.
RBI's Liquidity Push
The Reserve Bank of India has moved to an 'accommodative' liquidity stance, a signal that surplus liquidity will remain in the system. Since December 2024, the central bank has injected liquidity worth Rs 8.5 lakh crore (2.6% of GDP), turning a deficit into a surplus. This should support deposit rate cut transmission and support bank margins, Jefferies said.
Sectoral Outlook
The brokerage has a preference for lenders, power, telecom, autos, and real estate. Top stock picks include HDFC Bank Ltd., Axis Bank Ltd., Cholamandalam Investment and Finance Co., JSW Energy Ltd., Coal India Ltd., Bharti Airtel Ltd., TVS Motor Co., Eicher Motors Ltd., and Macrotech Developers Ltd.
In a recent reshuffle, Jefferies also added NTPC on rising power demand and Bharat Petroleum Corp. a beneficiary of low crude, while slashing exposure to Siemens India, owing to its non-power mix.
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