Its celebration on D’Street as US President Donald Trump announced a tariff cut for India. With the uncertainty about the deal finally over, it brought huge optimism among capital market investors. This optimism can be seen in today’s domestic benchmarks that surged past record highs. The international brokerage house, Jefferies, rejigged its model portfolio close on the heels of this announcement.
The brokerage house has trimmed weight on IT stock, while raising on metal stocks, which are Hindustan Zinc and JSW Steel, taking materials to ‘Overweight’ after the recent stock weakness.
Jefferies Overweight on Hindustan Zinc
As the silver precious metals saw a historic rally of over 60%, the share price of Hindustan Zinc came into the spotlight. Jefferies said that Hindustan Zinc provides attractive silver and zinc exposure with a strong cost advantage. The spot Silver is 50% above the December Quarter average. Jefferies expects a 41% growth in FY27 EBITDA.
The share price of Hindustan Zinc has fallen 15% in the last five trading sessions. The stock has dropped 3.35% in the past one month. However, the stock has given a return of 44% in the previous six months. The stock has increased 41% over the previous 12 months.
Jefferies Overweight on JSW Steel
Also, the Indian government has raised the import duty on steel, and the domestic steel companies revised the rates. JSW Steel should see a strong QoQ improvement as Indian steel prices rise post-safeguard duty and China’s anti‑involution measures. It expects the steel company’s EBITDA to increase 34% sequentially in the March quarter and 45% YoY in FY27.
The stock price of Godrej Consumer Products has changed little over the past one year and has declined by over 7% in the last six months. On the other hand, Eternal‘s share price has given a return of nearly 20% in the previous 12 months and has declined 6.6% in the last six months.
Eternal replaces Godrej Consumer in Jefferies model portfolio
However, Godrej Consumer Products will be replaced with Eternal (Zomato). Jeffereis said that Zomato is showing strong growth and margin improvement across quick-commerce and food delivery. Also, the Eternal’s stock price has corrected 25% from its peak, improving risk‑reward.
Jefferies on stocks and sectors to watch
Jefferies said that stocks and sectors with significant exposure to the US, which are likely to see the impact of a potential change in crude sourcing, include automobile components, under which Sona Comstar and Bharat Forge are included.
In the Chemicals sector, it has highlighted Navin Fluorine International, PI Industries, and SRF. In the Solar sector, Waaree Energies, Premier Energies, and Emmvee Photovoltaic Power. Lastly, the textile stocks such as Welspun Living and Adani Group companies.
“We watch out for details of the deals for concessions made by India and likely potential negatives from a surge in US imports. If the landed price of imported oil and gas from the US turns out to be more expensive, then it would be a negative for oil marketing companies,” said the global broker.
While not directly connected to the trade deal, India’s earnings growth is still set to increase by 5 percentage points YoY in FY27, Jefferies believes. There are three main reasons. First, Nominal GDP growth of 2 percentage points YoY as the all-time low inflation/deflator gets reversed.
Secondly, the biggest earnings weight sector, i.e., banking, should see a growth uptick on margin improvement (rate-cut cycle ending) and credit growth rise. Thirdly, which is the last one as well, consecutive surplus rainfall has created a low base of activity in several sectors like power, construction, summer plays, etc., and FY27 should be better.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.