India is among few markets where financials have underperformed a the confidence of investors in financials has dipped after the second wave of the COVID-19 pandemic in the country, says Vikash Kumar Jain, Investment Analyst, CLSA.

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Speaking to CNBC-TV19, Jain said that financials had been clear outperformers in 14 of the top 19 markets which make about 80-85 percent of global market capitalisation. There were only a few markets, India is one of them where on a year-to-date basis financials have underperformed.

“In my opinion financials are in a way reflation trade to play economy recovery post the pandemic. However, as the second wave peaked up investor belief around that reflation and that timing of that got clouded therefore confidence in a way came down and that is where the underperformance came from,” Jain said.

He believes that the second wave has peaked and over the next few months India will get into a gradual process of reopening by relaxations of lockdown measures by states.

“Again this confidence of playing the reflation trade will be back and that should help financials outperform. We have further increased weight in financial by taking some out of IT,” he added.

In the metal sector, he had the top two popular names in the focus portfolio in both the non-ferrous as well as ferrous.

“In the ferrous side, there is still more juice left. On the non-ferrous side, there is much more in terms of timelines. I would say that a lot of our estimates are ignoring the very strong deleveraging that metals would have because of this upmove. I think the deleveraging story itself is pretty strong and metals, in general, will also be reflation trade. We continue to like this space,” he added.

For full interview, watch accompanying video...

(Edited by : Ankit Gohel)

First Published:May 26, 2021 12:59 PM IST