Brokerage firm Jefferies has removed food-delivery aggregator Zomato from its model portfolio and has also exited its holding in the same. Another stock that has seen an exit from the model portfolio is telecom giant Bharti Airtel Ltd.
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Instead, the cash raised from Zomato's exit has been used to increase weightage in metal stocks. Tata Steel and Hindalco have replaced the two excluded names within Jefferies' model portfolio.
Between January and October this year, Jefferies' model portfolio has outperformed the Nifty 50 index by 209 basis points led by its underweight stance on IT and Metals and overweight stance on State Bank of India. This was partially offset by an overweight stance in property. Year-to-date, the outperformance comes down to 92 basis points and 10.8 percentage points since its inception in October 2020.
Jefferies' Current Model Portfolio
|Addition / Weight Increase||Deletion / Weight Decrease|
|State Bank of India|
Jefferies believes that there is a potential rise in competitive activity in the food delivery space as its chief competitor Swiggy has lost some market share. In a note last month, Jefferies highlighted that although Zomato has managed to cut down on losses, but it has come at the cost of its growth. Their industry channel checks suggest that the trend for the food service industry has been weak during October and November.
Bharti Airtel has also been removed from Jefferies' model portfolio. The brokerage firm cites concerns on rising 5G capex, which may not be compensated in the near-term with the help of tariff hikes. However, it continues to maintain a buy rating on the stock with a price target of Rs 855. Higher or earlier than expected tariff hikes, stronger 5G adoption are some of the upside triggers for the stock while delayed tariff hikes and a slow 5G adoption are downside risks.
In turn, Jefferies has increased its weightage on metal stocks like Tata Steel and Hindalco, including them in the model portfolio. As a result, the material sector weightage in Jefferies' portfolio goes up to neutral from nil earlier. The brokerage believes that a peak in US interest rates and China's reopening can add to the positive sentiment around metals.
Jefferies has also increased its weightage on Larsen & Toubro which trades near record highs, citing a pickup in the broader capex cycle, including housing.