Greed & Fear: Fresh Equity Supply Poses Risk To Indian Markets, Says Chris Wood

Indian corporates are turning to equity markets to raise capital once again, raising supply of fresh equities amid high valuations. This poses a risk of correction, Jefferies' Christopher Wood said in the latest Greed and Fear report.

Indian markets were seeing an average of $7 billion of fresh equity supply per month in the market before September 2024, when the correction began. In May, markets saw $7.2 billion fresh supply, while in June $6 billion equity was raised so far, Wood said. He cautioned that this amount supply is worrisome.

The Nifty 50 is trading at 22.2 times 12-month forward earnings after rising 14.1% lows from April 7. The Nifty Midcap 100 is trading 27.1 times 12-month forward earnings after it gained 23.7% from April 7 lows, the Greed and Fear note said. This correction combined with rich valuations is one of the reason why Indian corporates are again raising equities.

The focus in Indian markets remained on consumer sector since the budget announcement for financial year 2026–27. It shifted from investments as monetary easing also support further demand improvement, Wood noted.

However, Jefferies remained focused on private capital expenditure. Wood believes the recent investment cycle will be prolonged and slow instead of boom-and-bust seen between 2003 and 2017.