Mumbai: Christopher Wood, global equity strategist at Jefferies, has reduced his overweight on India by two percentage points and raised weightage on Singapore and Taiwan by one percentage point each. The surge in coronavirus cases in India is a risk to the country’s cyclical trade, particularly as stocks are not priced in for renewed lockdowns, said Wood in his weekly note Greed & Fear.
Jefferies believes that there will be no national level lockdowns.
India is seeing a record daily surge in coronavirus cases and states have begun to take some measures such as night curfews. Stock indices are down 3.6% from their record highs hit in mid-February.
Wood said he is also going to move allocation in his global sovereign bond portfolio from the 10-year to the 15-year Indian government bond where the yield is 6.71%, 54 basis points higher than the 10-year at 6.17%.
He said that any further near-term rupee weakness in the context of a stronger US dollar should prove to be manageable. A likely further rise in the oil price will be an undoubted headwind, he said.
Jefferies said this is also the case that inflation is not an issue on the demand side. The brokerage said this is why it would make sense for the RBI to move the formal inflation target from headline CPI to core CPI since the headline rate is influenced by supply factors, such as food prices, which are outside central bank’s control.