 | « Back to article | Print this article |
India’s stock markets corrected recently but foreign money is likely to chase China rather than India in the short-to-medium term, said Chris Wood, global head of equity strategy at Jefferies, on Thursday.
Wood told the Business Standard Manthan Summit in New Delhi he is bullish about Indian equities from a long-term perspective, but for the short term he is cautious given the quantum of foreign investor (FII) outflows and valuation woes.
He expects Indian frontline indices — Sensex and Nifty – to give 10-15 per cent returns from current levels from a 12-month perspective if FIIs return to the country.
“If someone has no exposure to Indian stocks, they should start buying now. When the tide turns, the rally would be very sharp,” he said.
The travel and tourism sector may give superior returns compared to other sectors.
Real estate stocks have corrected sharply since September 2024, but Wood said he has not changed his current allocation to the sector in his long-only India portfolio.
“Indian markets’ valuation was very high at its peak. But the massive selling by foreign investors has surprised me.
"While the first phase of the FII selling could be linked to fund rotation towards a cheaper Chinese market, the second bout of selling came amid positive news flow around DeepSeek,” Wood said.
DeepSeek, a Chinese startup that has earned headlines for its low-cost artificial intelligence models, has showcased the economic prowess of Asia’s largest in the technology sector.
“So, if any emerging market fund manager hadn’t already bought China until then, it gave them a reason to do so,” Wood added.
In the calendar year 2025, foreign investors have offloaded Indian stocks worth more than Rs 1 trillion.
Domestic institutional investors, including mutual funds, have put in Rs 83,000 crore.
Domestic flows have aided the country’s equity markets but they may reverse if local investors continue to see year-on-year decline in their investments.
Wood said that the issue for the economy is whether India’s private sector will take over the baton, applying the analogy of a relay race, in order to drive a broader capex cycle.
“However, there is a growing doubt of the lack of capex (capital expenditure) coming from the private sector, which has been disliked by the markets.”
Gold is reaching the level where it should have been 10 years ago.
One reason for gold price rising was Russia blocking reserves of the yellow metal. A strong US dollar is aiding sentiment for the metal, too.
“Short-term risks for gold are the settlement of the Russia-Ukraine war but it is still a good long-term bet. Between bitcoin, which I expect to rise to $150,000 levels, I would still prefer an investment in gold,” he said.
US-China ties
China is seeing “normalisation of flows” in its market amid multiple headwinds, said Wood.
The already cheap Chinese stock markets bottomed out in the fourth quarter of calendar year 2024, with the central bank doling out stimulus to stabilise demand, especially in the housing sector, along with the government asking companies to buy back their shares.
“With Donald Trump returning to the White House, I think the US-China relationship will improve and not get worse as Trump is a business guy and not a security guy.
"My view, however, is that Trump is not anti-China or Chinese people. He will use tariffs as a threat to bring Chinese business into the US,” he said.
