Metal Stocks | Jefferies Stocks: Jefferies dumps Zomato, picks 2 new metal stocks in its India portfolio

Stating that the impact of rising rates on market valuations seems priced in, Jefferies said the China opening up theme has gathered momentum which is good news for DM to EM shift and India flows. “We deploy our recently-raised cash in the model portfolio into metals. Additionally, we shift weight from Bharti, Zomato and Maruti into L&T, RIL and banks,” Jefferies’ equity analyst Mahesh Nandurkar said.

On exiting Zomato, which has fallen 56% from its 52-week high of Rs 142.40, he said they are incrementally wary of a potential rise in competitive activity in the sector as its chief competitor Swiggy has recently seen market share loss.

“We also shave off some weight from Maruti (potential headwind to discretionary consumption due to slower wage hikes/IT hiring) to banks,” he said, adding that it has brought the materials sector weight to neutral from currently nil in its portfolio.

Jefferies has also removed Bharti Airtel from its model portfolio on rising 5G capex, likely not compensated near-term by tariff hikes.

“The pickup in the broader capex cycle, including housing, is a positive for L&T, which continues to post double-digit order growth, and we add weight to the stock, driving our Industrials sector positioning to overweight. We also add weight on RIL as the core O2C business profitability could improve on China reopening (petchem margins at 12-year lows on weak China),” the brokerage said.

So far in the calendar year 2022, its model portfolio has outperformed the index by 92 bps and 10.8 percentage points since inception in October 2020.
Jefferies has also increased weightage in SBI and IndusInd Bank. It has an overweight stance on financials, consumer staples, industrials, utilities and real estate. On the other hand, the brokerage has underweight ratings on IT, energy, healthcare and telecom stocks.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)