Sell US and buy Indian stocks, says Chris Wood; ups India exposure

Christopher Wood, global head of equity strategy at Jefferies has recommended investors ‘sell’ US stocks and hike exposure to India as the flip-flop of tariffs by US president Donald Trump has put the markets on the edge.

With US stocks still trading at 19.2x forward earnings, global investors, Wood wrote in his recent note to investors, GREED & fear, should continue to reduce positions in favour of Europe, China and India.

"That does not mean that Trump cannot generate new positive momentum by the approach already suggested, namely dramatically scaling back tariffs and refocusing on tax cuts and deregulation, but it does mean that the base case remains US underperforming other stock markets in the context of a weakening US dollar and a bearish Treasury bond market," Wood wrote.

Indian stock markets, meanwhile, recouped losses suffered on account of stiff tariffs imposed by the US president across countries on April 2. Last week, the Sensex and the Nifty exhibited their best weekly show in four years, data shows, with a gain of around 4.5 per cent.

"One change will also be made to the Asia Pacific ex-Japan relative-return portfolio. The weighting in India will be increased by a further one percentage point by shaving further the weighting in Taiwan," Wood wrote

Despite the tariff-related fears, analysts, besides Wood, remain bullish on the 'India equity story' and suggest investors use the dips to buy from a long-term perspective. Stock selection, however, remains key, they said.

As a basket, those at Julius Baer, for instance, are cautious on the emerging markets (EMs) as implementation of higher-than-expected tariffs could pose significant risk to EM exports and earnings growth, given their heavy reliance on exports to the US.

However, they expect EMs to outperform developed markets (DMs) in the near-term due to lower valuations and our expectations of a weaker dollar.

As regards India, a revival in government spending and dwindling foreign institutional outflows should put a floor on the market around current levels, they said.

“High-frequency data signals slower consumption and government capital expenditure. However, recent fiscal and monetary stimulus is expected to boost momentum in 2025. The one-year forward price/earnings ratio is back below its 10-year average. We favour large caps over mid- and small-caps for their resilience and robust fundamentals,” said Mark Matthews, head of research for Asia at Julius Baer.