While foreign investor positioning in equities remains at its lowest levels in several years, India remains the best structural growth story in global equities, according to Jefferies' Greed & Fear report.
The note said that calendar year 2025 has been a year of 'healthy consolidation' for the Indian market, with the firm estimating inflows of around $50-70 billion over the next 12 months.
The expected inflows will be largely absorbed by steady inflows in mutual funds and systematic investment plans (SIP).
Despite the global headwinds, Jefferies sees scope for a new rally in the Indian market in the new calendar year, especially as economic growth picks up pace.
It must be noted that the Indian government has recently issued industry-wide cuts in Goods & Services Tax (GST), which is expected to boost consumption and liquidity in the Indian economy.
In addition, experts believe the recent rate cut by the US Federal Reserve may lead to the Reserve Bank of India cutting rates one more time by the end of this calendar year.
“There is still a chance that the 10-15% return target proves to be too modest,” the report stated, citing factors such as GST cuts, Reserve Bank of India easing, and improving corporate earnings.
Jefferies: Key Portfolio Adjustments
As far as the portfolio adjustment is concerned, Jefferies has announced fresh investments, with a 4% weighting each on Ambuja Cements Ltd., Le Travenues Technology Ltd., and Lemon Tree Hotels Ltd.
On the flip side, Jefferies has removed holdings in Reliance Industries Ltd and Axis Bank Ltd. while cutting exposure to ICICI Bank Ltd., JSW Energy Ltd. and REC Ltd. by one percentage point each.
“India's small to mid-cap universe, despite higher valuations, continues to show higher earnings growth potential, which justifies the positioning,” the note said.
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