Ambuja Cement, BEL Are Jefferies' New Additions Amid Shift In India Strategy

Jefferies has added Ambuja Cements Ltd. and Bharat Electronics Ltd, citing their positive outlook and strategic relevance. At the same time, it has trimmed allocations in Shriram Finance Ltd. and Coal India Ltd.

The brokerage has highlighted a shift in focus within its India Equity Strategy, noting that while valuations remain stretched, equity flows—both domestic and foreign—are now emerging as the key supportive factor for Indian stocks.

As of May 2025, MSCI India is trading at a price-to-earnings ratio of 23 times, up from 22 times just a few weeks prior. This level is 1.5 standard deviations above the long-term average, rendering valuations demanding, especially when juxtaposed against the forecast 11–12% compound annual growth rate in earnings for financial years 2025-2027. This anticipated earnings growth trajectory leaves limited room for disappointment, heightening the downside risk, noted Jefferies.

Despite the expensive valuations, equity inflows are proving to be the crucial counterbalance. Strong participation from both domestic and foreign investors has provided steady demand, which is likely to support the market even at higher valuation multiples. Jefferies points out that this sustained interest in Indian equities is helping offset the impact of moderated earnings growth and rising global uncertainties.

However, this increased investor appetite also brings a caveat: it enables a greater supply of equity from issuers, which could effectively cap further upside in the short term.

A potential trade deal between the US and India could serve as a near-term trigger for Indian equities, especially in the context of improving global trade dynamics. The recent softening of the US stance on tariffs—evidenced by rollbacks and temporary exemptions, including some toward China—has significantly reduced trade-related overhangs.

This shift is already being reflected in equity flows, with markets rebounding above pre-April levels. If a bilateral trade agreement between India and the US materialises—similar in scope to the ongoing UK-India FTA discussions—it could further boost investor sentiment and act as a catalyst for market upside.

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