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The brokerage firm CLSA raised India’s regional allocation to a 20% ‘overweight’ stance above the MSCI benchmark. The adjustment comes in response to a rebounding credit impulse, improving external dynamics, and strong GDP growth observed in the country.
Additional factors contributing to the favorable outlook include the upcoming inclusion of India in the global fixed income benchmark and beneficial energy pricing. These elements could potentially enhance India’s basic balance of payments funding gap, according to CLSA.
However, despite these positive indicators, the brokerage expressed concerns about the Reserve Bank of India’s (RBI) limited policy flexibility. They ranked India among the least flexible emerging markets for interest rate accommodation on their monetary policy scorecard due to expensive valuations.
After conducting an extensive quality growth names screening, CLSA identified several high-conviction picks. These include Reliance Industries, HDFC Bank, ICICI Bank, Bharti Airtel, State Bank of India, Bajaj Finance, Larsen & Tourbo, Axis Bank, ONGC, and Tata Motors (NYSE:).
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