India still remains the best equity story not only in Asia but globally, Chris Wood, Global strategist at Jefferies, told CNBC-TV18 in an interview on May 10. The veteran equity strategist also said he has been surprised by the resilience of the domestic market in the face of incessant selling by foreign investors.
Wood, who has been an India bull for decades, said that in the event that the Nifty 50 index corrects to levels of 14,000 points, he will raise the weightage of the country in his model portfolio.
Wood attributed the optimism towards India to the renewal of the real estate market and the country’s large captive domestic consumer market.
India holds among the highest weightage of 14 percent in Wood’s model portfolio for Asia-Pacific investments, reflecting his conviction in the domestic equity market. That said, the veteran strategist does not expect fireworks in the domestic market.
“To me this year is one of consolidation in the market where you want to be adding to your favourite stocks on any correction,” Wood said.
He also pointed out that the Reserve Bank of India (RBI) was right to preemptively hike interest rates by 40 basis points or else the selling in the rupee would have been higher.
The rupee sank to its record low of 77.58 against the US dollar on May 9 due to a strengthening US dollar and continued dumping of domestic equities by foreign investors.
“Current Indian central bank policy has been very dovish in the last two years compared to the past. The rate hikes could have happened earlier but the good news is that the rate hike happened last week or else the currency would have been hit much more,” Wood said.
Wood said that 200-250 basis points in rate hikes by the RBI’s Monetary Policy Committee should be enough to contain inflation, even the domestic bond market is pricing more than 300 basis points in rate hikes.
In terms of investment bets, Wood remained optimistic on the housing market where after a seven-year downturn, developers are beginning to see higher prices.
Besides real estate, Wood is also optimistic on cyclical sectors, especially, energy, as he expects global crude oil prices to breach $150 a barrel.
The equity strategist said that new-wage technology stocks have also become attractive after the recent correction in their prices. Several new-age tech stocks, which hit the domestic equity market last year, have fallen more than 50-60 percent in the past few months.
“These are the stocks you want to buy when you think that US monetary policy tightening is discounted,” Wood said.
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