NEW DELHI: Global brokerage firm Jefferies, which had tactically raised cash during the peak of the market in September, has now redeployed the idle capital to buy 6 stocks and also sold 4 counters. Jefferies has replaced Maruti Suzuki with Eicher Motors, Marico with Honasa (Mamaearth), and Power Grid with NTPC.
“We add Coal India, Honasa, Eicher, NTPC, HDFC Bank and ICICI Pru Life at the cost of cash, Marico, Maruti, Power Grid,” Mahesh Nandurkar of Jefferies said, adding that cash is being redeployed as key macro concerns of higher US yields, rising oil prices and near-term state election results have subsided.
“With the robust earnings performance, Nifty is now 18.8x 1-year forward – higher than the past 10-year average, but relative to EM (excluding China) the premium at 63% is in line with the historical average. Also, on a PEG basis, Indian markets appear reasonable. Notwithstanding any big external shock, the current market multiples can sustain given the strong domestic flows,” Nandurkar said.
Maruti was replaced with Eicher because two-wheeler demand is expected to grow at a faster pace than passenger vehicles over the next 2 years. “Eicher stock has lagged Nifty Auto Index CYTD on competitive concerns, but we see limited impact on EIM from Harley and Triumph launches, and see potential for re-rating as confidence on long-term market share sustainability rises. Maruti, on the other hand, is witnessing some demand-side pressures,” Jefferies said.
In the power sector, it said NTPC offers a higher EPS growth of 10% CAGR over 6% for Power Grid. In FMCG Mamaearth scored over Marico because the latter’s volume growth remains weak, with rural still under pressure. “Honasa Consumer, on the other hand, is on a strong growth trajectory, delivering 30%+ revenue growth with steady margin expansion. It also caters to a much premium consumer, relatively unimpacted by inflation and demand slowdown,” it said.
Jefferies has also increased the weight on Coal India by 3 percentage points citing improved earnings outlook and 7-8% dividend yield.
To add HDFC Bank and ICICI Pru Life, the brokerage has reduced weight on NBFCs as the rate cut cycle seems to be at least 6 months away.
“The recent RBI action raising risk weight on NBFC loans/unsecured retail credit drives our weight reduction Bajaj Finance and Chola. We raise HDFC Bank to neutral and also add ICICI Pru Life where valuations appear attractive relative to others,” Nandurkar added
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