CLSA has increased its India allocations citing a supportive macro outlook. The brokerage owned by China’s CITIC Securities has assigned a weightage of 18.2 per cent to India, 20 per cent higher than the country’s weight of 15.1 per cent in the MSCI All Country Asia Pacific ex Japan index.
Earlier, CLSA had a 40 per cent underweight on India vis-à-vis its weightage in the MSCI index. “Our previous contrarian underweight position worked between late October 2022 and late March 2023 but ultimately we persisted for too long with our negative view. Valuations and RBI monetary policy inflexibility remain our principal concerns,” it said.
The brokerage believes a positive trajectory for India’s credit impulse will support the equity market.
CLSA said despite the positive, it struggles with “expensive valuation and relative lack of RBI policy flexibility.” At 2.8 times, India’s CAPE ratio, although lower than the peak of 3.1 times in October 2022, is still “distinctly unappealing”, it said.
“India ranks as having among the least flexibility for interest rate accommodation versus EM peers on our monetary policy scorecard,” it says, referring to emerging markets.
Last month, Nomura had upgraded its stance on the Indian market from ‘neutral’ to ‘overweight’. In the Asia (excluding Japan) portfolio, the brokerage has recommended a weight of 18.2 per cent, 100 basis points higher than India’s weightage in the benchmark MSCI Asia ex-Japan index. China and South Korea are the two other markets which Nomura is overweight on, while it runs an underweight position on Singapore and Philippines.
