Global brokerage Jefferies said that its model portfolio has outperformed the Nifty by 209 bps from January to October 2022. However, since then it has underperformed as it raised cash, and the performance of the metals and the auto sector reversed.
In its recent portfolio rejig, Jefferies chose two metal stocks — Tata Steel and Hindalco to its India model portfolio. It bought the materials sector weight to Neutral from currently Nil as it believes that the China reopening and US rate peak can drive extended positive sentiments on metals.
“China’s covid reopening now appears finally in progress as the govt pursues relaxation from COVID restrictions. Nonetheless, the Chinese stock markets have rallied by 34% from Oct’22 lows. China’s reopening should have a significant global impact in 2023, with commodities (metals, oil, etc) likely seeing stability /upward movement in demand,” Jefferies said.
Apart from metal stocks, it increased its weightage on Larsen & Toubro which is near record highs, and on market heavyweight Reliance Industries. However, it removed Zomato, Bharti Airtel and Maruti Suzuki.
It said that competitive activity in the food industry has increased and Zomato’s major competitor Swiggy has also lost some market share. Even though Zomato has cut down losses, it has come at the cost of its growth.
Bharti Airtel has been removed from its model portfolio citing concerns about rising 5G capex, which might not get compensated in the near term even with the help of tariff hikes.
As far as Maruti Suzuki is concerned, Jefferies sees a potential headwind to discretionary consumption due to slower wage hikes / IT hiring.
Written by Simran Bafna
