Key Points

The firm said that despite foreign investor positioning being at multi-year lows, India remains the strongest structural growth story in global markets.

In its latest ‘Greed & Fear’ report, Jefferies described 2025 as a year of “healthy consolidation” for Indian equities.

The brokerage expects that consistent domestic flows from mutual funds and systematic investment plans (SIPs) will absorb most of the expected foreign inflows, helping the market sustain momentum.

The report also highlighted that India could witness a fresh rally in 2026 as economic growth picks up pace.

It pointed to recent government measures, including industry-wide cuts in Goods and Services Tax (GST), which are expected to boost consumption and liquidity.

In addition, the US Federal Reserve’s recent rate cut has increased the chances of the Reserve Bank of India easing rates again before the end of this year.

“There is still a chance that the 10-15 per cent return target proves to be too modest,” the report said, citing the combined impact of GST cuts, possible RBI rate easing, and stronger corporate earnings.

The brokerage further noted that India’s small and mid-cap universe, despite higher valuations, continues to show stronger earnings growth potential compared to large-cap companies. This, it said, justifies continued positioning in the segment.

“India’s small to mid-cap universe, despite higher valuations, continues to show higher earnings growth potential, which justifies the positioning,” the note said.

According to Jefferies, India’s ability to combine strong domestic demand with improving corporate profitability and supportive policy actions makes it stand out as the most attractive growth story in global equities.

- IANS