Is India Ready for Long-Term Alpha Creation? Jefferies Reports
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Synopsis
Jefferies recently highlighted the resilience of the Indian market, emphasizing potential growth in small and mid-cap stocks despite challenges. As the automobile sector prepares for a boost from GST cuts, investors are being advised to strategize wisely for long-term gains.
Key Takeaways
- India remains poised for long-term wealth creation.
- Strong growth opportunities exist in small- and mid-cap stocks.
- The automobile sector is set to benefit from the GST cut.
- Investors should focus on 'compounders' and multibaggers.
- Recent SEBI changes have sparked interest in SIFs.
New Delhi, Sep 9 (NationPress) In light of recent market setbacks and global uncertainties, India is still poised for long-term wealth generation, according to a report released on Tuesday. The analysis by global brokerage Jefferies highlights that particularly small- and mid-cap stocks present significant growth potential, even as larger companies exhibit limited growth prospects.
Experts predict that the automobile sector will be one of the primary beneficiaries of the GST reduction, with a substantial surge in demand anticipated post-September 22.
Auto stocks have already shown positive momentum and are expected to remain robust despite recent gains.
“The Indian stock market is gradually regaining its strength, bolstered by expectations of an earnings surge from the newly sanctioned GST 2.0 reforms,” the brokerage firm noted.
Jefferies observed that while the Nifty index has slipped by 0.65% over the past year and both small- and mid-cap indices have also faced corrections, the overall market is gearing up for improved performance in the near future.
Factors such as easing earnings downgrades, attractive valuations, and a significant decrease in India's valuation premium compared to other emerging markets are highlighted as key positives.
“The reduction in earnings downgrades, fair valuation metrics, and a notable decline in India's premium valuation relative to other emerging markets are fostering a more stable environment,” the brokerage emphasized.
Jefferies anticipates India’s corporate profits to grow at a rate of 10% annually between FY26 and FY27.
Regarding market strategies, Jefferies recommended that investors refrain from making extreme bets, suggesting that ‘compounders’ have shown the best performance this year.
The brokerage also identifies value in underperforming stocks and potential multibaggers that could yield strong alpha.
Moreover, the recent SEBI reforms and stagnant market returns have reignited interest among high-net-worth investors in specialized investment funds (SIFs), which permit unhedged short positions of up to 25% of net asset value.
Jefferies mentioned that it is rolling out new long-short and short-only strategies in this arena, focusing on factors such as momentum, earnings revisions, free cash flow, valuations, and company size.
Point of View
I believe the insights provided by Jefferies offer a valuable perspective on the Indian market's resilience. While challenges persist, the underlying potential for growth and wealth creation cannot be overlooked. Investors should remain informed and strategically engaged with the evolving market dynamics.
NationPress
09/09/2025
Frequently Asked Questions
What is Jefferies' outlook on India's stock market?
Jefferies believes India is well-positioned for long-term wealth creation, particularly in small- and mid-cap stocks.
How does the GST cut impact the automobile sector?
The automobile sector is expected to benefit significantly from the GST cut, leading to an increase in demand post-September 22.
What investment strategies does Jefferies recommend?
Jefferies advises avoiding extreme bets and focusing on 'compounders' and potential multibaggers for strong alpha generation.
What are specialized investment funds (SIFs)?
SIFs allow high-net-worth investors to take unhedged short positions of up to 25% of net asset value, enhancing investment strategies.
What is the expected corporate earnings growth in India?
Jefferies anticipates a 10% annual growth in India's corporate earnings between FY26 and FY27.
