New Delhi: CLSA changed its stance on Indian equities by shifting its allocation away from China. The changes took place after Donald Trump’s US presidential win. The Trump administration is expected to amp up trade wards at a time when China’s reliance on exports has risen, the brokerage said in a note.
At the start of October, the brokerage had decided to direct funds from India to China. However, that has changed since the US presidential poll results.
CLSA makes a U-turn
CLSA’s strategy reversal is significant since it comes against the backdrop of a major correction in Indian equities on the back of an FPI pullout worth nearly Rs 1.14 lakh crore. In 2023, CLSA had raised India’s rating to 20 per cent overweight from 40 per cent underweight citing a positive credit environment and lower cost of energy on the back of cheaper Russian crude availability. CLSA was also positive on India’s GDP growth prospects. This was changed a year later in October 2024 to 10 per cent overweight.
Why CLSA changed its stance
The brokerage changed its stance citing India’s stable foreign exchange environment. CLSA said it considers Indian equities better for long-term investment in comparison with Chinese stocks.
CLSA on India Q2 earnings
CLSA’s Vokash Kumar Jain said India’s Q2 earnings slowdown was self inflicted. He said India’s valuation worries were much lower coupled with an FII washout. He attributed the selling to the IPO frenzy which coincided with a revival in the Chinese economy. However, as stated above, the China exhilaration has also moderated since Trump’s win.
India is being impacted by the relatively recent dollar rally after Trump’s win. The emerging market funds have seen outflows prompting fund managers to book profits, said Jain. However, this will also get digested now. Trump’s unpredictability will also likely settle in the coming 2 months leading to better prospects for the stock market, he added.
CLSA Global Research has decided to go 20 per cent overweight on India, while taking a benchmark stance on China. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
