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CLSA's Chris Wood says selloff in NBFCs offers buying opportunity for long term

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The recent sell-off in the non-banking financial companies (NBFCs) should be used as an opportunity to buy for the long term, said  Christopher Wood, managing director and equity strategist at CLSA.

CLSA's Chris Wood says selloff in NBFCs offers buying opportunity for long term
The recent correction in the non-banking financial companies (NBFCs) should be used as an opportunity to buy for the long term, said  Christopher Wood, managing director and equity strategist at CLSA.
Shares of the non-banking financial companies (NBFCs) have been hammered in the past week on growing fears of a liquidity crunch in the sector.
As many as 39 stocks in the non-banking financial space have fallen by up to 53 percent in September, including the likes of Dewan Housing Finance ltd (down 53 percent), Reliance Capital (down by over 32 percent), L&T Finance (lower by over 29 percent), Indiabulls Housing Finance (dipping by 26.5 percent).
"There have been some fun and games in India’s financial stocks over the past week partly driven by Reserve Bank of India announcements, and partly driven by the market discounting higher wholesale funding costs for non-bank financial companies. This setback should be viewed as a long-term buying opportunity," wrote Woods in his weekly note to investors, GREED & fear.
However, there's a caveat: Portfolios with such exposures are required to hedge the higher oil price risk.
Global benchmark Brent is on course for its fifth consecutive quarterly increase, the longest stretch since early 2007, when a six-quarter run led to a record high of $147.50 a barrel.
An increase in the prices of crude oil, used in logistics and transportation, doesn't bode well for India as it imports nearly 80 percent of its oil needs from gulf countries.
Portfolio rejig 
Woods also removed Maruti Suzuki from the Asia ex-Japan long-only portfolio and replaced it with Reliance Industries (RIL) as the financial house sees RIL's Jio to be India’s only 'large cap' quoted internet play. The CLSA report said the availability of cheap smartphones can help boost the growth story in the country's potential internet space.
RIL, the company that wholly owns the telco major Reliance Jio, is on top of its game and is known to be the disruptor of the telecom industry.
CLSA, however, said that despite the recent change in the portfolio, Maruti Suzuki's investment is still up 114 percent since its inception.
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