Indian markets set to outperform Asia; earnings growth seen at 17% in FY27
Synopsis
A Jefferies report by global equity strategist Chris Wood makes a contrarian case for India: even after a 15.6% dollar-term fall this year and a ranking as the region's second-worst performer, the report recommends an overweight, projecting 17% earnings growth in FY27 and a private capex cycle that may finally be arriving — though rich valuations and surging share issuance remain real risks.
Key Takeaways
Jefferies' Asia Maxima recommends a 12% allocation to India, above its 10.5% MSCI AC Asia Pacific ex-Japan weight.
Indian corporate earnings growth is projected at 17% in FY27 , up from 14% this fiscal year.
Real GDP growth of 6.5–7% and nominal growth of 11–12% are forecast for FY27 .
Nifty is down 13.4% in local currency terms, the second-worst in the region after Indonesia (–42.3%).
Monthly equity issuance jumped to $9.5 billion in August from $1 billion in April , flagged as a key cap on upside.
MSCI India trades at 20.5x 2026 earnings vs a regional average of 12.4x , keeping valuations at a premium.
The Indian equity market is likely to outperform its regional benchmark despite a 15.6% fall in dollar terms this year, with corporate earnings growth projected to climb to 17% in FY27, according to a report by Jefferies' Asia Maxima. The report, authored by Chris Wood, global head of equity strategy at Jefferies, recommends a 12% allocation to India against the stock's 10.5% weight in the MSCI AC Asia Pacific ex-Japan index.
Where India Stands in the Regional Pecking Order
In local currency terms, the Nifty is down 13.4% this year, ranking as the second-worst-performing market in the Asia Pacific region — behind Indonesia, which has shed 42.3% of its value. Despite this underperformance, the report notes that India has outpaced the Asia Pacific ex-Japan benchmark by 17% since April 2020, underscoring the durability of its structural growth story.
The report adds that India's neutral weighting in the index has declined sharply — from 18.6% at the end of 2024 to 10.5% currently. Valuations, however, remain a concern: MSCI India trades at 20.5 times expected 2026 earnings, compared with a regional average of just 12.4 times.
Growth Projections and Macro Outlook
Wood projects real GDP growth of 6.5–7% and nominal GDP growth of 11–12% in FY27. Earnings growth is expected to accelerate from 14% this fiscal year to 17% in the next, supported by resilient domestic demand and a broadening credit cycle. The report characterises the structural growth story as 'remarkably resilient.'
Notably, the report flagged heavy share issuance as the key cap on upside. Monthly equity issuance surged to $9.5 billion in August from just $1.0 billion in April, absorbing mutual fund inflows of ₹38,800 crore per month — a supply-demand dynamic that could limit near-term index gains even as fundamentals improve.
Credit Expansion and Capex Signals
The report points to a broadening credit cycle as evidence of a long-awaited private sector investment revival. Bank credit expanded 18.1% year-on-year as of mid-September, while corporate loans rose 21.6% in August. Loans to small, medium and micro enterprises (MSMEs) grew 25.5%, and deposits expanded 17.3%.
Machinery imports totalled $66 billion in the twelve months ended August, up sharply from $29 billion in FY21 — a signal that capital expenditure may finally be gaining traction in the private sector, the report said.
High-Frequency Data Backs the Recovery Narrative
Several high-frequency indicators reinforce the recovery case. GST collections were up 14.8% in August. Power consumption rose 9.4% in April–August, a marked acceleration from just 1.8% in January–March. Residential property sales in the top seven cities increased 7% in the first eight months of the year, reversing a 1% decline recorded in 2025.
Additionally, Wood suggested the Indian rupee may have found a floor following a 10.7% decline since early 2025, which, if sustained, could reduce currency headwinds for foreign investors and improve dollar-adjusted return calculations.
What to Watch Next
With valuations still at a premium to regional peers and equity issuance running hot, the near-term trajectory will hinge on whether the capex cycle translates into sustained earnings delivery. The FY27 earnings season will be the first real test of Jefferies' 17% growth projection.
Point of View
The margin for earnings disappointment is thin. What makes this cycle different, the report argues, is the broadening credit data and a machinery-import surge that suggests private capex is finally arriving after years of false dawns. The rupee stabilisation thesis adds another layer — if foreign investors have been sitting on currency losses, a floor in the rupee could unlock re-entry flows. But the equity issuance surge to $9.5 billion a month is a structural drag that mainstream coverage is underplaying: it means every mutual fund inflow is largely being recycled into new paper, not bidding up existing prices.
NationPress
10 Oct 2026
Frequently Asked Questions
What does the Jefferies report say about Indian equity markets?
The Jefferies Asia Maxima report recommends a 12% allocation to India — above its 10.5% benchmark weight — calling the market a slight overweight despite a 15.6% fall in dollar terms this year. The report projects 17% corporate earnings growth in FY27 and sees the structural growth story as intact.
Why is Nifty underperforming this year?
Nifty is down 13.4% in local currency terms in 2026, ranking as the second-worst performer in the Asia Pacific region after Indonesia. The Jefferies report attributes this partly to heavy equity issuance — which surged to $9.5 billion a month in August — and premium valuations relative to regional peers.
What GDP growth is forecast for India in FY27?
Chris Wood of Jefferies projects real GDP growth of 6.5–7% and nominal GDP growth of 11–12% for FY27. These forecasts are underpinned by resilient domestic demand, strong credit expansion, and early signs of a private sector capital expenditure cycle.
What are the key risks flagged in the Jefferies report?
The report identifies heavy share issuance as the primary cap on upside, with monthly equity supply rising from $1 billion in April to $9.5 billion in August, effectively absorbing mutual fund inflows. Elevated valuations — MSCI India at 20.5 times 2026 earnings versus a regional average of 12.4 times — are also flagged as a structural risk.
Has the Indian rupee stabilised?
According to the Jefferies report, the Indian rupee may have bottomed after a 10.7% decline since early 2025. If confirmed, this would reduce currency headwinds for foreign investors and potentially improve dollar-adjusted returns on Indian equities.
