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    Christopher Wood remains bullish on Indian markets despite run-up; prefers real-estate sector

    Christopher Wood remains bullish on Indian markets despite run-up; prefers real-estate sector

    Christopher Wood remains bullish on Indian markets despite run-up; prefers real-estate sector
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    By Pranati Deva   IST (Published)


    Wood continues to maintain a bullish view on the Indian equities in 2021 even after such a major rally.

    Jefferies' Christopher Wood has maintained a bullish view on the Indian equities in 2021, not deterred by the Sensex's bull run. The frontline BSE index touched scaled the 50,000 mark for the first time ever on January 21, rising nearly 100 percent from its multi-year low, hit in March 2020, owing to the coronavirus-induced economic slowdown.
    In this week's GREED & fear report, Woods says the key reason for this surge is the scale of the cyclical recovery in the coming fiscal year post the dramatic collapse in growth in the Q2 of 2020 when the real gross domestic product (GDP) declined by 23.9 percent YoY in that quarter. For FY22, Wood sees real GDP rising by 13.2 percent YoY.
    The only reason for a bull market correction, according to Wood, will be a massive economic downturn or a material tightening in US Federal Reserve's (US Fed) policy. But, he doesn't see the possibility of either of these catalysts materialising in the near term.
    "The economic downturn is not going to happen since the vaccine rollout implies the opposite and the resulting unleashing of pent-up demand, which will be given further momentum by the sheer scale of the Covid-19 stimulus announced last week by the now inaugurated President Joe Biden," Wood explained in the note.
    Another major reason for the rise in benchmarks is faster than expected earning recovery. Wood expects this earnings momentum to continue. He sees earnings growing by 37 percent in FY22.
    Among sectors, the report remains bullish on the real estate sector on the back of expected sales revival after a prolonged slump. Nifty Realty index has also performed mostly in line with the frontline Nifty 50—rising nearly 90 percent since March 2020 low. Among individual stocks, Sobha Developers, Godrej Properties, DLF and Brigade Enterprises have more than doubled during this period since then.
    Jefferies noted that sales volumes in the Indian housing market have peaked out in 2013, and were still one-third below their peak in 2019 before the Covid-19 outbreak. But going ahead, it sees residential property sales nearly doubling this year on a YoY basis. Yet, then they would still be 30 percent off their 2013 peak, it added.
    Also, currently, the prices are very cheap as historically low mortgage rates make borrowing affordable, it noted.
    "Meanwhile, the fundamentals of the market on the ground are much healthier as a result of the Real Estate (Regulation and Development) Act implemented in 2016. The result, combined with other shocks such as demonetisation, the introduction of GST and now Covid-19, has meant a brutal consolidation. Indeed GREED & fear, in many years of following property markets, has never seen a consolidation like it which is why the surviving major quoted developers should be viewed as long term holds," the report further explained.
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