The brokerage’s preferred plays for the rebound include Lodha, Cholamandalam, Adani Energy, Shriram Finance, Jubilant FoodWorks, Mankind Pharma, NTPC and Crompton Greaves Consumer Electricals. Jefferies also reiterated its “high conviction” call on cement, citing a pricing-led recovery.
Jefferies noted that the MSCI India Index has trailed the MSCI Emerging Markets Index by 24 percentage points over the past 12 months—the widest such gap in 15 years. “Historical trends suggest that following a significant (15–20%+) underperformance, MSCI India tends to bounce relatively speaking,” analysts Mahesh Nandurkar, Abhinav Sinha and Priyank Shah said.
Valuations back in line
India’s valuation premium to emerging-market peers, which spiked to 90% in March–April, has since reverted to its 10-year average of 63%. While the MSCI India’s forward price-to-earnings ratio is still 10% above its long-term mean, Jefferies said broader measures, such as the bond yield–earnings yield gap, are aligned with historical norms.
Domestic buying momentum
Equity mutual fund inflows jumped 75% month-on-month to $6.4 billion in July, more than double the April–June monthly average. Non–mutual fund domestic institutions, including insurers, exchange-traded funds and alternative investment funds, have also been net buyers, averaging $2.8 billion a month this year versus $1.6 billion in 2024. Jefferies called these flows “a big downside protection and a sentiment booster.”
Foreign positioning at lows
The brokerage said foreign portfolio investors’ India weightings are near decade lows, with large emerging-market funds holding just 0.2 percentage points overweight to the benchmark—well below the 2.5-point average and far from peaks above 4 points.
September earnings boost
Jefferies expects a strong September-quarter earnings rebound from last year’s low base, when elections slowed government spending, and from an earlier Diwali this year. The seasonal boost, however, is likely to reverse in the December quarter.
“The bounce, however, may not sustain for long due to the weak value vs growth equation and equity supply concerns,” the analysts cautioned.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)