Jefferies’ India portfolio bet: Why MCX, Lenskart and Bajaj Finance made the cut over HDFC Bank and PolicyBazaar

Global rating agency Jefferies has made a series of changes to its India long-only equity portfolio, exiting HDFC Bank, PolicyBazaar and REC while adding Multi Commodity Exchange of India (MCX) and eyewear retailer Lenskart Solutions.

“GREED & fear will make some changes this week in the India long-only equity portfolio. The investments in HDFC Bank and PolicyBazaar will be removed and replaced by investments in Multi Commodity Exchange of India (MCX) and eyewear retailer Lenskart Solutions,” the brokerage said in a report.

The brokerage has also raised the portfolio weight of Eternal by one percentage point, funded by a corresponding reduction in its allocation to Bharti Airtel.

The changes come as Jefferies turns more constructive on India’s domestic growth outlook, citing a pickup in bank credit, renewed foreign equity inflows and measures that have helped support the rupee.

What changed in Jefferies’ India portfolio?

HDFC Bank and PolicyBazaar have been removed from the portfolio and replaced with MCX and Lenskart, respectively. State-owned finance company REC (formerly Rural Electrification Corporation) has also been dropped, with Bajaj Finance taking its place.

Jefferies’ portfolio now has a 4% allocation to Bajaj Finance, 4% to MCX and 4% to Lenskart. Eternal’s weighting has been increased to 5%, while Bharti Airtel’s has been reduced to 4%.

“The investment in REC Limited will also be removed and replaced by an investment in Bajaj Finance, while the investment in Eternal will be increased by one percentage point by shaving the investment in Bharti Airtel,” the report noted.

The portfolio continues to have significant exposure to financials, with ICICI Bank, State Bank of India, SBI Life Insurance, Bajaj Finance, Tata Capital and Chola Finance among its holdings.

Jefferies noted that REC has delivered a 228% return in rupee terms since it was added to the portfolio in December 2022. Bajaj Finance, meanwhile, has gained 49% since it was removed from the portfolio in January 2024. Notably, the stock had previously featured in Jefferies’ Asia ex-Japan long-only portfolio for nearly five years between May 2015 and March 2020, during which it gained 551%.

Why Jefferies is positive on India

Jefferies said India’s market backdrop has improved, with bank credit growth accelerating to 17-18% year-on-year, its strongest pace in more than a decade. Corporate lending has emerged as the key driver, growing around 20% YoY, while credit to agriculture and retail has expanded 17% and 16%, respectively.

The brokerage also sees healthy demand for automobiles and property as supportive factors for the domestic economy.

Jefferies said India recorded $2.45 billion in net foreign equity inflows in July, even as cumulative foreign selling remained substantial at $25.4 billion year-to-date. The brokerage said the market benefited from the unwinding of the so-called memory trade.

“India actually saw $2.45bn of net foreign buying of equities in July as the market benefited from the unwind out of the memory trade even though net foreign selling of Indian equities is still a massive $25.4bn year-to-date,” the report highlighted.

The foreign brokerage said the RBI’s scheme to attract foreign currency deposits from non-resident Indians has generated stronger-than-expected inflows. The scheme has so far attracted around $41 billion, with inflows expected to reach $80-100 billion over the next two months before the facility closes on September 30.

The RBI introduced the concessional swap facility for fresh FCNR(B) deposits on June 5 to support the rupee. Jefferies noted that the scheme is the third such measure adopted by the government to support the currency, following similar initiatives in 1993 and 2014.

Another source of support has come from foreign investment in Indian government bonds. Jefferies said overseas investors have brought in around $8.7 billion since the beginning of June after interest income on such investments was made tax-free.

On rupee, interest rates

The combination of stronger capital inflows and RBI measures has improved the outlook for the rupee, according to Jefferies. The currency, which touched 96.96 against the US dollar in May, had recovered to around 95.17.

On monetary policy, the RBI has kept its policy rate unchanged for a fourth consecutive meeting and retained its neutral stance. Jefferies expects only one 25-basis-point rate hike during the current tightening cycle.

Last week, the RBI’s Monetary Policy Committee (MPC) kept the benchmark repo rate unchanged at 5.25%, extending the policy pause that has been in place since December 2025, while retaining its neutral stance. The Standing Deposit Facility (SDF) rate remained at 5.0%, while the Marginal Standing Facility (MSF) rate and Bank Rate were unchanged at 5.50%.

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