India best post-covid recovery story in Asia, says Jefferies’ Chris wood; reaffirms bullish bet

Falling coronavirus cases, booming stock markets, and a budget that gives a big boost to spending are some factors that have made Chris Wood, Global head of equity strategy, Jefferies reaffirm his bullishness for Indian equity markets. “With Covid cases in India now 88% off their peak amid growing hopes of herd immunity, India looks right now Asia’s best post Covid recovery story,” Wood said in his weekly Greed and Fear letter. India’s weightage in Chris Wood’s portfolio is at 14%, a 5.1% mismatch from MSCI AC Asia Pacific ex-Japan index. 

Budget gets a thumbs up

Earlier last week, Wood said that the key point to focus on in the Union Budget is that all the incremental increase in expenditure is going to CAPEX, not social programmes. Although he has raised concerns over fiscal deficit that is pegged at 9.5% of GDP for this fiscal year and  6.8% of GDP for the next. “Clearly, the question raised by such an approach is whether the capex is done efficiently, in terms of the targeted areas like roads, railways, subways and water. Still, no one can be in doubt that the investment is required. In GREED & fear’s view, if any Indian government can pull this off it is likely to be Narendra Modi’s with his long-demonstrated focus on detail,” he said.

Cyclical recovery 

Loan restructurings, which is coming in lower than expected for India’s leading banks, was singled out as a positive by Wood last week. Jefferies’ India expects bank loan growth to rise to 7.5% on-year in the next financial year.

Chris Wood had increased exposure to India in his Asia ex-Japan portfolio by 1 percentage point, earlier in December last year. The ace strategist has seconded views of Jefferies’ head of India research Mahesh Nandurkar who forecasts earnings to grow by 37% for the coming fiscal year and real GDP is to surge 13.2% on-year basis. In January, Chris Wood made a case for India’s residential property market as cyclical recovery picked up. “The hope is that a pickup in the likes of cement and steel capex should become visible later this year or early next year,” he had said. India’s property and real estate market had gone through consolidation after structural reforms such as GST and RERA were introduced.