Jefferies adds 3 stocks to India long-only portfolio; drops RIL, Axis, trims ICICI, REC, JSW

Jefferies on Friday said it has added Ambuja Cements, Le Travenues Technology (Ixigo) and Lemon Tree Hotels to its India long-only portfolio, assigning each a 4 per cent weight. The foreign brokerage dropped Reliance Industries and Axis Bank from the model portfolio and cut allocations in ICICI Bank, REC and JSW Energy by one percentage point each. Jefferies’ model portfolio now comprises 23 stocks, with Adani Ports & SEZ and SBI Life Insurance holding the highest weights at 6 per cent each. DLF, Macrotech Developers, Bharti Airtel and PB Fintech are among the other stocks with a 5 per cent weightage. 

Jefferies in its GREED & fear note said India is experiencing what it views as a phase of healthy consolidation. The base case, as outlined by Jefferies’ head of India research Mahesh Nandurkar at the brokerage’s 4th India Forum in Gurgaon this week, is that the market will likely trade sideways for the rest of the year, with mutual fund inflows continuing to absorb equity supply.

So far in FY25 (since April 1), India has recorded $21 billion of inflows, including around US$3 billion a month through Systematic Investment Plans (SIPs), where investors contribute fixed monthly amounts. These flows have largely absorbed equity supply of $6–10 billion a month.

Jefferies expects the supply pipeline to remain heavy at US$50–70 billion over the next 12 months, barring a market collapse. This reflects the continued appetite of corporates and private equity investors to raise capital at attractive valuations.

Currently, MSCI India trades at 22x forward earnings—or 25x if financials are excluded.

Jefferies said Indian investors have high expectations from the domestic stock market after the impressive compound annual growth rate achieved over the past 22 years. The Sensex had risen by an annualised 17 per cent since the start of 2003 to the end of 2024, compared with an annualised return of 11.2 per cent for the S&P500 over the same period. 

"Yet seven months on GREED & fear is at risk of being too bullish since the Senex is up “only” 11.8% on the total-return basis since GREED & fear made that speech on 27 February. It should be noted that the call was made after the Sensex had already declined by 12.8% from the peak reached last September," it said.