India remains 'ripe for long-term alpha creation', says Jefferies

New Delhi, Sep 9 (IANS) Despite recent market underperformance and global uncertainties, India remains well-positioned for long-term wealth creation, a new report said on Tuesday.

The data compiled by global brokerage Jefferies believes that small- and mid-cap stocks in particular offer strong growth opportunities, even as large caps show limited upside.

Analysts believe that the automobile sector will be among the biggest beneficiaries of the GST cut, with demand expected to rise sharply after September 22.

Auto stocks have already reacted positively and are likely to remain strong despite their recent rally.

“The Indian stock market is slowly regaining momentum, supported by expectations of an earnings boost from the recently approved GST 2.0 reforms,” the brokerage firm said.

Jefferies noted that while the Nifty has declined 0.65 per cent over the past year and small- and midcap indices have also corrected, the broader market is setting up for stronger performance ahead.

Easing earnings downgrades, reasonable valuations, and a sharp fall in India’s premium compared to other emerging markets are among the key positives.

“The slowdown in earnings downgrades, reasonable valuation metrics, and a sharp fall in India’s valuation premium compared to other emerging markets are creating a more balanced environment,” the brokerage said.

The brokerage expects India’s corporate earnings to grow at 10 per cent annually between FY26 and FY27.

On market strategy, Jefferies advised investors to avoid extreme bets and said that “compounders” have been performing the best this year.

The brokerage also sees value in laggard stocks and multibaggers that can generate strong alpha.

Meanwhile, recent SEBI changes and flat market returns have sparked fresh interest among high-net-worth investors in specialised investment funds (SIFs).

These funds allow unhedged short positions of up to 25 per cent of net asset value.

Jefferies said it is introducing new long-short and short-only strategies in this space using factors like momentum, earnings revision, free cash flow, valuations, and company size.

--IANS

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