Pressure from advanced economies might lead to shifts in global trade, potentially accelerating efforts by BRICS nations toward de-dollarization, he noted.
Christopher Wood, global head of equity strategy at Jefferies, has urged investors to view current challenges as buying opportunities in the Indian market, according to reports. Amid growing global economic uncertainties and escalating trade tensions, particularly involving the United States, Wood advised clients to lean into Indian equities rather than pull back.
Tariff Headwinds To Eventually Benefit India?
In his closely watched Greed & Fear newsletter, Wood reiterated that India should not yield to aggressive tariff pressures from the U.S. administration. He added that the tariff threats are ultimately not aligned with America’s best interests, describing them as transient and likely to be reversed. This anticipation forms the basis of his bullish stance on India’s resilience.
Looking further ahead, Wood highlighted how pressure from advanced economies might catalyze transformational shifts in global trade, potentially accelerating efforts by BRICS nations – Brazil, Russia, India, China, and South Africa – toward de-dollarization. The change could weaken reliance on the U.S. dollar as the central currency for international trade, potentially benefiting emerging economies like India.
Recovery After Relative Underperformance
While India has traditionally held a strong allocation in Jefferies’ portfolios, Wood highlighted that the country has just endured one of its steepest phases of relative underperformance in the past 15 years. The MSCI India index has trailed the MSCI Emerging Markets index by 24 percentage points over the past year and by 18 points since mid-April.
Wood attributed this weakness largely to stretched valuations and an unprecedented flood of equity supply. The Nifty is trading at 20.2 times one-year forward earnings, though below its October 2021 peak of 22.4x.
Equity supply hit a record $10.4 billion in June, sharply higher than the $7.3 billion monthly average in the latter half of 2024. In contrast, he noted that Korea has surged on the “Value-Up” theme and Taiwan has benefited from ‘hyperscaler-led capital expenditure’, he said.
Despite the cautious stance, Wood stressed that Indian equities have historically rebounded after similar phases of weakness. Strong domestic flows also provide support, with equity mutual fund inflows nearly doubling in July to $6.4 billion.
Policy measures may also aid sentiment. The Reserve Bank of India has cut rates by 100 basis points this year and continues to maintain a dovish tone, even as the rupee has weakened 4.2% against the dollar since May.
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