MUMBAI: Stand Firm Against Trade Pressures, Says Jefferies' Christopher Wood

Christopher Wood, a leading analyst on emerging markets at global broking major Jefferies, has suggested that India should not bow to US President Donald Trump's pressure tactics relating to higher tariffs. He advised Jefferies' clients to buy India, rather than sell, given the current global situation.

The Shift Towards De-dollarisation Among BRICS Nations

Wood also indicated that the way Trump is going against some of the world's largest economies, it would push at least the BRICS—the block of Brazil, Russia, India, China and South Africa—towards de-dollarisation. De-dollarisation refers to a trade process, where rather than using the US dollar as the currency for trade between two countries, the partners trade in a non-dollar currency.

Why Now Is the Time to Invest in Indian Equities

In his widely read newsletter titled Greed & Fear, Wood said that Jefferies would not view the previously discussed 50% tariff on Indian imports to the US as a reason to sell Indian equities. "Rather, it is probably a reason to buy them since Greed & Fear's view is that it is only a matter of time before Trump backs off the stance, which is not in America's interest.

"On this point, it is worth noting that the track record makes it clear that it pays to stand up to the Donald," he said.

India's Market Potential and Future Prospects

Wood said Jefferies has almost always been significantly bullish on India in Greed & Fear's various portfolios, most particularly, its Asia ex-Japan long-only portfolio. He mentioned that a recent report by Jefferies India highlighted that the country has just suffered its biggest period of under-performance over the past 12 months in a global emerging market context spread over the past 15 years.

Still, Jefferies India made an interesting point in the report: following previous such periods of under-performance, the Indian market tended to bounce on a relative basis. "Or, in other words, that it is now too late to cut India with valuations now back near the 10-year average 63% PE (price-earnings) premium over emerging market peers," Wood said.

BRICS Reunited Against US Policies

The Jefferies strategist also said that one of the principal reasons BRICS countries are coming together again is because an effective foreign policy conduct for a major world power requires a conceptual framework and "this is what is conspicuously lacking in the current US administration. The 47th US president certainly has no such framework and is also bereft of an adviser who has one."

"This has become only too starkly evident in the past several days as Trump has succeeded in bringing China, Russia, India and Brazil together like never before. Indeed, BRICS as a grouping has been regalvanised," he observed in the newsletter.