Summary of this article
Jefferies’ equity strategist Christopher Wood has announced exit from HDFC Bank from its portfolios
Jefferies also lowered weightage on India due to falling rupee and rising crude oil prices
Jefferies’ top equity strategist Christopher Wood has decided to exit HDFC Bank from two flagship portfolios. The call to exit positions from the bank came amid a sharp fall in HDFC’s share price.
Wood has also cut down his allocations in India as domestic outlook has weakened due to fall in rupee and rise in crude oil prices. The rupee has fallen over 4 per cent in March alone and is currently hovering near a record low of 94.85 to the US dollar.
Wood, in the latest “GREED & Fear” report disclosed that the largest private sector bank of India, HDFC has been removed from his Asia ex-Japan and global long-only equity portfolios. Instead Wood has redeployed the proceeds into HSBC.
“An investment in HSBC will also be introduced with a 4 per cent weighting by removing the investment in HDFC Bank,” Wood said. The brokerage has removed HDFC Bank from its Asia ex-Japan long-only equity portfolios and a similar switch is being made in global portfolios.
He has also been paring back his portfolios in India and Australia while adding Taiwan, the report said. The brokerage indicated changes in its Asia Pacific ex-Japan relative-return portfolio, where weightage on India and Australia will be reduced by 2 per cent each, while Taiwan’s weight will increase by 4 per cent. Currently, India’s weight in Jefferies’ Asia Pacific ex-Japan allocation is at 13 per cent, marginally higher than the MSCI benchmark.
The call to exit from HDFC Bank came post a fall in the price of HDFC shares as investors have been puzzled since Chakraborty’s resignation from HDFC Bank, though Wood has not provided a rationale behind the exit. Chakraborty in a letter dated March 18, announced his exit from the bank citing differences over “values and ethics” with the bank, after which the bank appointed Keki Mistry as interim part-time chairman. Since Chakroborty’s resignation, HDFC Bank shares have fallen over 10 per cent, and closed at Rs. 756.2 a piece on March 27 on the NSE. Shares of the private sector lender has fallen over 14 per cent in March.
Subsequently, the Securities and Exchange Board of India (Sebi) has initiated its preliminary review on the claims made by Chakraborty in the letter and whether other directors were aware of any material information and failed to document it, according to a report by Reuters. The Reserve Bank of India (RBI) last week said that it had found “no material concerns on record as regards its (bank’s) conduct or governance”.
Wood, who has been bullish on India for a long time, has signalled preference for cleaner options in global and Asian banks at this stage, amid the ongoing war in Iran and as global markets are rattled by surging crude oil prices.
Goldman Sachs has also downgraded its outlook on the Indian market to “marketweight” from “overweight” on March 26. The brokerage has also cut its Nifty 12-month target to 25,900 and warned of an earnings downgrade due to energy shocks. The Nifty closed at 22,819.60 on March 27, around 2.1 per cent down from previous close.
