Jefferies Raises Confidence in India and China Amid USD Decline

Jefferies has increased its investment exposure to India and China in its latest Asia Pacific ex-Japan strategy, demonstrating robust confidence in the economic and market potential of these countries. The firm has assigned India a recommended weighting of 21% in the Asia ex-Japan equity portfolio, marking an overweight position compared to its 18.1% share in the MSCI benchmark.

This elevated stance on India positions it among the top regional preferences alongside markets like China. The decision coincides with a period where global investors are rebalancing portfolios to reduce exposure to US dollar-denominated assets amid indications that the greenback's peak has occurred.

Asian currencies, including the Indian rupee, are entering a long-term appreciation phase, increasing the attractiveness of regional equities to international investors. Although the report doesn't give a detailed country-specific breakdown for India, the elevated allocation underscores confidence in India's domestic demand, economic stability, and policy continuity.

India emerges as one of the more resilient economies in the Asia-Pacific realm, bolstered by strong private consumption, ongoing infrastructure projects, and a burgeoning digital economy. Jefferies' overweight recommendation resonates with broader market trends where India continually draws foreign inflows and exhibits superior corporate earnings compared to peers.

Unlike export-heavy economies that might encounter currency appreciation challenges, India is favored due to its sizable internal market and policy leaning towards self-reliance. The report also observed a shift in investor preference from export-focused to more domestically-centered equities across Asia, benefiting India significantly.

Jefferies concluded that this trend motivates global investors, whether in equities or fixed income, to channel more funds to the Asian region, even if currency appreciation affects export stocks. The firm's optimistic outlook on India suggests its potential as a major regional diversification component and a pivotal growth engine in the emerging market landscape.

(With inputs from agencies.)