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India Stocks: Large Caps Shine as Midcaps Fade
7 Oct
Summary
- Large-cap Indian stocks now offer better valuations.
- Kotak Mahindra Bank added to model portfolio.
- Rate-sensitive sectors see reduced exposure.
As global bond yields pressure equities, foreign brokerage Jefferies is advising an increase in exposure to Indian large-cap stocks. The firm notes that large-caps now present more favorable valuations relative to midcaps, a key factor in their updated investment strategy.
Jefferies has made specific portfolio adjustments, notably adding Kotak Mahindra Bank, citing the removal of leadership uncertainty and potential for accelerated growth. Reliance Industries also sees an increased weighting due to attractive valuations and anticipated earnings upgrades driven by stronger refining margins.
In contrast, the brokerage has reduced its allocation to rate-sensitive sectors, including NBFCs, real estate, and consumer discretionary stocks. This move reflects concerns that rising global bond yields could further dampen valuations in these areas. The MSCI India index has also experienced a decline, underperforming emerging market peers, which Jefferies suggests makes large-cap stocks a more compelling investment.
