Chris Wood's GREED and Fear raises India's weightage, cuts China's; details here | Mint
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Business News/ Markets / Stock Markets/  Chris Wood's GREED and Fear raises India's weightage, cuts China's; details here
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Chris Wood's GREED and Fear raises India's weightage, cuts China's; details here

The GREED & Fear index believes that consolidation is coming in China’s property sector, which India already went through triggered by the double whammy of the Real Estate (Regulation and Development) Act of 2016 and demonetisation in November 2016.

As per the report, India is likely to record its third year of stock market outperformance in a regional and emerging market context. (Pixabay)Premium
As per the report, India is likely to record its third year of stock market outperformance in a regional and emerging market context. (Pixabay)

Christopher Wood, in the latest GREED & Fear report, announced that they are raising India's weight while reducing China's weight.

"To adjust the Asia Pacific ex-Japan relative-return portfolio in part for recent market action to maintain the Overweight in India and Neutral in China. Accordingly, the weighting in India will be increased by one percentage point while the weighting in China will be reduced by one percentage point," said the report.

As per the report, India is likely to record its third year of stock market outperformance in a regional and emerging market context. The MSCI India has outperformed the MSCI AC Asia Pacific ex-Japan and the MSCI Emerging Markets by 14.5 percent and 11.1 percent, respectively, on a total-return basis year to date and by 66.4 percent and 66 percent since the start of 2021.

Read here: InCred sees Nifty FY24 target at 21103; suggests booking profits in infra stocks

The sense that this is India’s moment has been only furthered by the results of the recent state elections which came in better than expected for the BJP, noted the report.

The results, earlier this month, saw the BJP win the three state elections of Madhya Pradesh (MP), Rajasthan and Chhattisgarh held in November while Congress won only in the state of Telangana. Indeed, the BJP gained both seats and vote share in all four states. For example, the BJP won 115 seats and 42 percent of the votes in Rajasthan and 164 seats and 49 percent of the votes in MP, compared with 73 seats and 39 percent of the votes in Rajasthan and 109 seats and 42 percent of the votes in MP in the previous elections in 2018, it pointed out.

The BJP lost elections to Congress in those three states in 2018 and has now won them all back with clear majorities, it added.

"BJP's win in the 3 state elections of MP, Rajasthan and Chhattisgarh is much better than what exit polls suggested and reinforces the consensus expectations of a Modi win 2024 national elections with a greater likelihood of 300+seats for the BJP. This boost to the investor sentiment should augur well for domestic cyclical sectors viz. banks, industrial, power, property, and mid-caps. Competitive populism from both the BJP and Congress is also clearly visible," a December 4 Jefferies report had said.

Read here: Goldman Sachs raises Indian shares to ‘overweight’ on growth, earnings momentum

The high popularity enjoyed by PM Modi (approval rating at 60-70 percent through his tenure) remains a major contributing factor to BJP's performance, and will play an important role in the 2024 elections, noted the brokerage.

These state polls show that the party remains fairly popular in the core Central/West/North part of India. “We believe that the BJP is likely to win back the 200+ seats it has won consecutively in 2014 & 2019 from the 7-large states (UP, MP, Rajasthan, Gujarat, Maharashtra, Bihar, Karnataka). The party can also secure another 90-100 seats (96 in 2019) out of 170 other smaller contributing states which include Chhattisgarh, Telangana, Delhi, Jharkhand, Assam, West Bengal etc.," it said. As such, Jefferies believes a repeat of 300+ seats is now a possibility.

It also added Coal India, Honasa Consumer ltd, Eicher Motors Ltd, NTPC Ltd, HDFC Bank Ltd and ICICI Prudential Life Insurance Company Ltd to its India model portfolio deploying cash and at the cost of Power Grid Corporation of India Ltd, Marico Industries, Maruti Suzuki India Ltd and NBFCs (Non-Banking Financial Companies).

In an equity strategy note dated November 24, analysts Mahesh Nandukar, Abhinav Sinha, and equity associate Nishant Poddar of Jefferies India Pvt Ltd said that they had raised cash tactically in their model portfolio in early September, which they said are now deploying as the key macro concerns around higher US yields, rising oil prices and near-term state election results have subsided.

Jefferies had replaced Maruti Suzuki India Ltd with Eicher Motors as they expect the Indian two-wheeler demand to grow at a faster pace than passenger vehicles over the next two years. Eicher Motors stock has lagged the Nifty Auto index current year to date on competitive concerns, but Jefferies sees limited impact on Eicher Motors from Harley and Triumph launches and sees a potential for re-rating as confidence on long-term market share sustainability rises. Maruti, on the other hand, is witnessing some demand-side pressures, as per Jefferies.

Meanwhile, Power Grid Corporation was replaced with NTPC as both are attractive plays on the India power story but NTPC offers a higher earnings per share growth of 10% CAGR (compound annual growth rate) of over 6% for Power Grid. Also, Marico Industries was replaced by Honasa Consumer Ltd as Marico has delivered well on margin expansion in the last few quarters, although volume growth remains weak, with rural still under pressure.

Read here: JP Morgan upgrades India to ‘overweight’; advises buying on dips

China

The GREED & Fear index believes that consolidation is coming in China’s property sector, which India already went through triggered by the double whammy of the Real Estate (Regulation and Development) Act of 2016 and demonetisation in November 2016.

Jefferies’ China property analyst Calvin Leung estimates that property sales at SOE developers were down 5 percent YoY in November compared with a 49 percent YoY decline for private developers. As for the first 11 months of 2023, private developers’ sales were down 47 percent YoY while SOE developers’ sales were flat over the same period.

"Amidst all the evidence of mounting stresses, and the seeming end game of a massive consolidation of developers, the interesting question to GREED & fear is what is the fundamental level of property sales in China assuming only end users and no investors. If such a level has been reached already, that offers the best hope for a genuine pickup in demand. Still given the psychological damage done to belief in the command economy model as a result of the events of the past two years and given the Chinese middle class’s increased awareness of the negative demographics post-Covid, there is clearly a risk of sales falling below that fundamental level of demand most particularly if every Chinese person who owns more than one property, and there are many of them, seeks to dispose of surplus properties," explained the report.

Read here: Moody’s Cuts China’s Credit Outlook to Negative

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Published: 11 Dec 2023, 03:26 PM IST
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