Jefferies cuts RIL, HDFC Bank weights, ups SBI, Axis Bank's in long-only portfolio. Here's why

Jefferies' Global Head of Equity Strategy Christopher Wood has made a couple of changes to his India long-only and global long-only portfolios. Wood said Jefferies would introduce an investment in Bharti Airtel Ltd in the India long-only portfolio with a 3 per cent weighting. This will be paid for by shaving the investment in Reliance Industries Ltd (Ltd) by three percentage points. The investment in HDFC Bank Ltd will also be reduced by two percentage points, while the investments in Axis Bank Ltd and State Bank of India Ltd (SBI) will be increased by one percentage point each.

"As for the global long-only portfolio, the investment in HDFC Bank will be reduced by two percentage points while the investments in Axis Bank and TSMC will be increased by one percentage point each," Wood said.

In its GREED & fear report, Wood said it is testament to the confidence of Indian Prime Minister Narendra Modi ahead of the pending general election in April-May that his government announced a budget on February 1 that is almost devoid of vote-buying populism. This, he said, is a pleasant surprise to GREED & fear.

Wood said Jefferies’ head of India research Mahesh Nandurkar in a report on the budget said the government capex is now budgeted to increase 17 per cent in FY25 beginning April 1 following an estimated 28 per cent growth this fiscal year (see Exhibit 18), while the fiscal deficit is projected to decline from 5.8 per cent of GDP this fiscal year to 5.1 per cen in FY25, compared with market expectations of 5.3 per cent.

"The finance minister also mentioned that the FY26 fiscal deficit target is below 4.5 per cent. The budget has caused Nandurkar to increase further the investment in Larsen & Toubro in his portfolio. GREED & fear already has a 6 per cent weighting in that stock in the India long-only portfolio and a 5 per cent position in the Asia ex-Japan long-only portfolio. Meanwhile, it has been an ongoing feature of Modi’s government that the fiscal deficits have been used mainly to finance infrastructure investments rather than transfer payments," he said.

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