Jefferies, a global brokerage firm, has undertaken strategic changes to its model portfolio, involving both the sale and purchase of stocks. The adjustments reflect a response to evolving market dynamics and macroeconomic factors.

Maruti, Power Grid and Marico have been removed from the portfolio and replaced by Eicher, NTPC and Honasa Consumer, the parent company of Mamaearth. Jefferies has also added Coal India, HDFC Bank Ltd and ICICI Prudential Life Insurance. 

Jefferies notes that it tactically increased cash in its model portfolio in early September. The redeployment is based on the subsiding of key macro concerns such as higher US yields, rising oil prices, and near-term state election results. 

Three stocks were sold in this reshuffle. Conversely, six stocks were added to the model portfolio. Firstly, Maruti Suzuki was replaced by Eicher Motors, with Jefferies anticipating faster growth in two-wheeler demand compared to passenger vehicles over the next two years. Eicher Motors is viewed as having potential for re-rating.

Secondly, Power Grid Corporation was substituted with NTPC, as both are seen as attractive plays on India’s power story. NTPC offers higher earnings per share (EPS) growth (10% CAGR) and potential re-rating on the Environmental, Social, and Governance (ESG) front.

Lastly, Marico Industries was replaced by Honasa Consumer Ltd. Marico has delivered on margin expansion, but its volume growth remains weak. In contrast, Honasa Consumer, the parent company of Mamaearth, is on a strong growth trajectory with over 30% revenue growth and steady margin expansion. 

Coal India was included with a weightage of three percentage points due to its improved volume growth trajectory, attractive valuation, and a 7-8% dividend yield. 

HDFC Bank Ltd was added to the portfolio as a shift from Non-Banking Financial Companies (NBFCs), anticipating at least a six-month delay in the rate cut cycle.

ICICI Prudential Life Insurance Company Ltd was included for its attractive valuations relative to others in the sector.