GMO’s Jeremy Grantham throws weight behind Infosys, ICICI Bank

GMO’s Jeremy Grantham throws weight behind Infosys, ICICI Bank

MUMBAI: Jeremy Grantham, one of the most prominent hedge fund investors in the world and a notorious bear, has taken bullish bets on two of the most sought-after trades in the Indian stock market – Infosys and ICICI Bank.

Grantham’s hedge fund GMO bought substantial American Depository Receipts of ICICI Bank and Infosys during the December quarter, at a time when investors have turned optimistic on the prospects of the two companies.

In Infosys, Grantham added 1.4 million ADRs during the quarter, as the IT firm’s locally listed shares soared 24 per cent during the period following a stellar set of earnings for the September quarter, filings with the Securities and Exchange Commission showed.

The hedge fund’s holding in the IT services company jumped 6.1 times from the September quarter, reflecting the optimism Grantham has for the IT major. Infosys has raised its revenue growth guidance after the end of the December quarter, with several brokerages betting on the company to be the biggest beneficiary of the ongoing digitalisation in the corporate world.

“Infosys is well placed to capitalise on multi-year core modernization, cloud and digital opportunities interspersed with lift-shift-transform deals,” brokerage firm Kotak Institutional Equities had said in a recent note.

Infosys’ gains in the current quarter have been muted so far, as investors chose to book some profits after the stock hit a record high in January post December quarter earnings announcement.

Grantham’s bet on ICICI Bank appeared even more bullish, as his hedge fund increased holding in the private sector lender’s ADRs by 13 times in December quarter. GMO raised its holding to 326,000 ADRs from merely 25,500 at the end of September quarter.

ICICI Bank’s shares in the December quarter soared 51 per cent as investors’ concerns over its asset quality eased following September quarter earnings. Subsequently, the stock has risen 20.5 per cent this quarter after another set of stellar earnings for the December quarter.

Strong provision buffer, improving operating profitability, much better loan growth and strong deposit franchise should help return on equity to sustainably improve more than 15 per cent by 2022-23 with delta from improving credit cost outlook, brokerage firm Prabhudas Lilladher had said after the lender’s earnings.

One stock where Grantham pared his position was Dr Reddy’s Laboratories. In the December quarter, GMO sold 32,900 ADRs of the drugmaker to pare its holding to 410,508. This is the second successive quarter in which GMO has trimmed its holding of Dr Reddy’s despite the strong performance of the company’s locally traded shares.

Earlier this month, brokerage firm Nomura Financial Advisory and Securities India had downgraded the stock to ‘neutral’ rating on concerns over high price erosion in the US product portfolio and near-term cost headwinds.

While the stock was flat in the December quarter, it has slumped 11.3 per cent so far this quarter.

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