Indian equity markets are likely to outperform their Asian and emerging market (EM) peers, wrote Christopher Wood, global head of equity strategy at Jefferies in his recent note to investors, GREED & fear.
“The valuation differential between India and China has reverted to its traditional mean after the huge 65 per cent outperformance of MSCI China over MSCI India since the end of October 2022 to late January following the China re-opening. This sets up the potential for renewed outperformance by India in an Asian and EM context. The domestic demand story certainly remains intact to justify the continuing belief in the equity market,” Wood said.
That said, the challenge, as always in India, Wood believes, remains relatively high valuations. The Nifty Index is trading at 17.4x earnings on a 12-month forward basis, compared with a long-term average of 16.2x since 2008. Yet, he remains bullish on Indian equities across his portfolios.
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