Jefferies stays marginally overweight on India; valuations improve despite weak Q1
New Delhi, April 10
Global brokerage firm Jefferies has maintained a marginally overweight position on India in its Asia allocation, recommending a 13.0 per cent weight against a 12.5 per cent benchmark, despite weak market performance in the first quarter of 2026.
According to the report, India's underperformance has eased since the onset of the Iran war, both in the Asian and global emerging market context.
The report noted "India has just about stopped underperforming since the onset of the Iran War in both an Asian and global emerging market context"
India was among the worst-performing markets in Asia during Q1 2026, mainly due to strong foreign outflows rather than any major weakness in fundamentals. The report noted that India was the second-worst performer in the region after Indonesia.
It said, "The first quarter was another quarter of disastrous underperformance for India in the sense that it was the worst performing market in Asia after Indonesia."
However, Jefferies highlighted an improvement in valuations, stating that the market's earlier premium has corrected significantly. India has moved from being "expensive" to "fair and nearing attractive" levels, marking a shift in its valuation profile.
The report also pointed out that most foreign institutional selling had already occurred earlier this year, indicating limited additional pressure from this segment.
Jefferies identified two key risks. On the external front, any escalation involving Iran could lead to a spike in crude oil prices, posing a risk for import-dependent India. On the domestic side, a slowdown in mutual fund inflows could weaken a key source of market support and increase volatility.
The brokerage added that India is no longer a crowded trade and is gradually emerging as a relative value play within defensive emerging market allocations.
However, it maintained a cautious outlook, stating that overall conviction remains moderate rather than aggressive.
— ANI
Reader Comments
The biggest risk mentioned is so true - oil prices. Every time there's tension in the Middle East, our petrol prices and current account deficit give me anxiety. The government really needs to fast-track our renewable energy plans.
"Marginally overweight" and "moderate conviction" doesn't sound very confident, does it? After such a weak quarter, I was hoping for a stronger bullish call. Feels like they're just playing it safe.
The point about mutual fund inflows slowing is crucial. So much of the recent market support has been from domestic retail investors via SIPs. If that tap slows down, volatility could really increase. Time to be selective, not just buy any stock.
Interesting to see the global perspective. "No longer a crowded trade" might mean less herd mentality and more stable growth ahead. The shift from expensive to fair value is the key takeaway for me.
Bas, foreign investors sell and our market tanks. Then they call it "attractive" and will probably buy back at lower prices. We retail investors always seem to bear the brunt. Need stronger domestic institutions to counter this FII volatility.
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