India By Far The Best Structural Story In Asia: Chris Wood

Christopher Wood, global head of equities at Jefferies in his latest Greed and Fear report talked about string pushing in China and animal spirits in India.

Wood has assigned India a dominant 40 per cent weightage in the Asia ex-Japan long-only portfolio and says that India is by far the best structural story in Asia.

On the performance of Indian stock market, Wood said that he is surprised by the resilience of the Indian stock market in the face of bearish sentiment triggered by the wave of foreign selling, prevailing high valuations and monetary tightening.

This resilience should be viewed as reflecting the strength of the structural story, Jefferies said while expecting 2022 to be the year of consolidation for domestic stocks.

India, he said, is the exact opposite of China with all the positive multiplier effects of a new up-cycle in property after a seven-year downturn which lasted from 2013 to 2020. 

In his report, he highlighted some macroeconomic indicators which are giving a positive outlook of India's structural story.

He said strong GST revenues and buoyant retail sales are giving evidence of economic resilience.

"The Retailers Association of India reported that retail sales in July were 18 per cent higher than the pre-Covid July 2019 level. It is also a positive that credit growth is picking up with bank loan growth of 14.5 per cent YoY in late July, the highest level since March 2019. Meanwhile the latest quarterly bank results showed a benign combination of rising credit growth and declining NPLs," the report said. 

On the first quarter earnings of the companies, Wood said that the season was positive from the standpoint of the industrial sector.

He expects the Indian market to consolidate in 2022 after the strong gains recorded last year and the commencement of a monetary tightening cycle.