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India Gazette
3 hours ago
- Business
- India Gazette
Valuation concerns return to Indian market, especially in Midcap stocks: Jefferies
New Delhi [India], June 20 (ANI): According to a report by Jefferies, the Indian stock market is once again facing concerns around high valuations, particularly in the midcap segment. The report pointed out that the recent market rally has pushed valuations to high levels, raising questions about sustainability and risks going forward. Jefferies stated, 'The rally in the market means valuations have become an issue again, particularly in the mid-cap space'.The report highlighted that the benchmark Nifty Index is now trading at 22.2 times its 12-month forward earnings after rising 14.1 per cent from its recent low on April 7. The midcap space has seen even sharper gains. The Nifty Mid-Cap 100 Index has surged by 23.7 per cent since April 7 and is now trading at a steep valuation of 27.1 times 12-month forward earnings. Due to such high valuations, many corporates are once again placing equity in the market to take advantage of the bullish sentiment. The report added that the equity supply has increased sharply, with companies raising around USD 7.2 billion in May and USD 6 billion so far in June. Jefferies noted that this wave of equity supply poses the main risk to the market. Before the market correction that began in late September last year, monthly equity supply was running at around USD 7 billion. The report also highlighted a shift in market focus since the Union Budget announcement on February 1. There has been a noticeable rotation from investment-led themes to consumption-led themes. This shift has been supported by a softer monetary policy environment, which has benefited consumer finance stocks. However, the report acknowledged that any upcoming investment cycle is likely to be slower and more prolonged, unlike the boom-bust cycle that occurred during FY03-FY17, which led to overcapacity, especially in the power sector. The report outlined that while the Indian markets are enjoying a strong rally, especially in the midcap space, rising valuations and heavy equity supply could pose risks. (ANI)
Economic Times
7 hours ago
- Business
- Economic Times
Jefferies' Chris Wood sounds alarm on India's $13 billion stock sale spree, rejigs portfolio
Chris Wood, the well-known India bull at Jefferies, is recognized in emerging market circles for his steadfast optimism. Chris Wood, the prominent India bull at Jefferies known in emerging market circles for his unwavering optimism, is flashing warning signals as a blistering rally has pushed valuations to uncomfortable levels and triggered a $13 billion selloff by promoters and other strategic investors cashing in on sky-high stock prices. The veteran strategist's cautionary tone comes as equity supply has surged to $7.2 billion last month and $6 billion so far in June, a pace that threatens to derail the market's impressive recovery from early April lows. "The rally in the market means that valuations have become an issue again, most particularly in the mid-cap space," Wood said in his latest Greed & Fear newsletter. "This is also why corporates are again placing equity to take advantage of such valuations." The numbers paint a stark picture of just how stretched Indian equities have become. The Nifty now trades at 22.2 times 12-month forward earnings after surging 14.1% from its April 7 low, while the Nifty Mid-Cap 100 Index commands an even steeper 27.1 times forward earnings following a 23.7% gain from the same period. Wood's warning carries particular weight given his reputation as one of the most bullish foreign voices on Indian markets. His shift to caution underscores the gravity of the current supply-demand imbalance. "It is this supply which poses the main risk to the market," he warned, noting that equity supply was running at around $7 billion monthly prior to the correction that began in late September last year. Also Read | Most expensive Nifty stock ever? Eternal at 455 PE dares you to doubt the hype The scale of the selloff has been staggering. Promoters, private equity, and venture capital investors have offloaded over Rs 40,000 crore worth of stakes in just two weeks of June, driven by daily large block and bulk deals that are set to surpass last month's Rs 43,000 crore selling total. Major transactions have dominated headlines: Vishal Mega Mart's promoter sold a 19.6% stake to mutual funds in a Rs 10,220 crore bulk deal, Bajaj Finserv's promoter offloaded approximately Rs 5,500 crore worth of shares, and Reliance Industries executed a Rs 9,580 crore stake sale in Asian Paints. Just two days ago, Hindustan Zinc's promoter Vedanta sold about 66.7 million shares—representing 1.6% equity—in a block deal valued at Rs 3,028 crore. Also Read | Promoter, PE & VC selling crosses Rs 40,000 crore in 2 weeks: Red flag for Nifty bulls? Despite the supply concerns, Wood remains constructive on certain themes. He noted that market focus has rotated toward consumption rather than investment since the February 1 Union Budget announcement, helped by a more dovish monetary policy stance from new RBI Governor Sanjay Malhotra compared to his predecessor Shaktikanta Das. "The Indian stock market has enjoyed a decent rally off the early April low, helped by evidence of a much more dovish RBI governor," Wood observed, pointing to consumer finance stocks that have rallied sharply. Bajaj Finance, for example, has surged 35% year-to-date. Wood maintains his bullish stance on real estate, keeping a 19% weighting in property developers in his India long-only portfolio despite the BSE Realty Index climbing 35% from its April 7 low. The sector remains 14% below its June 2024 peak, suggesting further upside potential.A recent report by Jefferies' India property analyst Abhinav Sinha forecasts pre-sales growth of the top seven covered developers to accelerate to 22% year-over-year in FY26 after slowing to 17% in FY25—a four-year low."Greed & Fear also believes that the property market, now in its 5th year of an upturn, has further to run," Wood said. Wood is making tactical adjustments to his India portfolio this week, removing investments in Larsen & Toubro, Thermax, and Godrej Properties while adding TVS Motor, Home First Finance, and Manappuram Finance with four percentage points each. He's also boosting existing positions in PB Fintech and Bharti Airtel by one percentage point each. The moves reflect a shift away from traditional investment themes toward more consumption-oriented plays, aligning with his view that the market focus has rotated from capex to consumer India's equity markets navigate this treacherous terrain of stretched valuations and relentless supply, Wood's warning serves as a sobering reminder that even the most bullish investors are taking notice of the mounting risks.
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Business Standard
12 hours ago
- Business
- Business Standard
Valuations, fresh equity supply key risk to Indian stock market: Chris Wood
High valuations, especially in the midcap space, coupled with fresh supply of equity via the initial public offers (IPOs) are the main risks to the Indian stock markets, cautioned Christopher Wood, global head of equity strategy at Jefferies in his recent note to investors, GREED & fear. The rally in the market (since recent lows), Wood cautions, means that valuations have become an issue again, most particularly in the mid-cap space. The Nifty Index now trades at 22.2x 12-month forward earnings after rising by 14.1 per cent from its April 7 low. While the Nifty Mid-Cap 100 Index trades at 27.1x 12-month forward earnings, following a 23.7 per cent gain from its April 7 low. 'This is also why corporates are again placing equity to take advantage of such valuations. The equivalent of $7.2 billion of equity supply was raised last month and $6 billion so far in June. It is this supply which poses the main risk to the market. Equity supply was running at around $7 billion a month prior to the correction, which began in late September last year,' Wood wrote. Mid, smallcaps steal the show From April 7 levels, while the Nifty 50 has rallied nearly 12 per cent till date, the up move in the mid-and smallcap indices has been sharper. The Nifty Midcap 150 index and the Nifty Smallcap 250 indexes have surged nearly 17 per cent and 18.5 per cent respectively during this period, ACE Equity data shows. Meanwhile, primary market activity is set to rebound in the coming week with at least four companies planning to raise a total of about ₹15,000 crore ($1.7 billion) via IPOs, reports suggest. Some prominent ones include Kalpataru, Ellenbarrie Industrial Gases, and Globe Civil Projects. HDB Financial Services Ltd., a unit of India's biggest private lender HDFC Bank, is also planning to launch its $1.4 billion IPO on June 25, reports suggest. This will be one of the biggest IPOs since Hyundai Motor India IPO in October 2024 that raised over Rs 27,000 crore. Capex theme The focus in the Indian market since the budget announcement on February 1, Wood wrote, has rotated to playing consumption rather than investment, helped by the monetary easing context with consumer finance stocks rallying sharply. The property market, now in its 5th year of an upturn, has further to run, he believes. 'Pre-sales growth of the top seven developers covered by Jefferies is forecast to accelerate to 22 per cent YoY in FY26 after slowing to 17 per cent YoY in fiscal year 2024-25 (FY25) ended March 31, a four year low. A lower mortgage rate, now at 8 per cent and expected to fall to 7.5 per cent when the latest Reserve Bank of India (RBI) rate cuts are passed on, should help boost sales in the affordable and mid-income segments,' he said. Portfolio rejig Wood has also rejigged his India portfolio, with the investments in Larsen & Toubro, Thermax and Godrej Properties will be removed and replaced by investments in TVS Motor, Home First Finance and Manappuram Finance, with four percentage points each. An additional one percentage point each will be added to the existing investments in PolicyBazaar and Bharti Airtel, he said. The investment in Larsen & Toubro in the global long-only equity portfolio has been replaced by an investment in Saint-Gobain, a French construction materials company. In the Asia ex-Japan long-only portfolio, too, the investment in Larsen & Toubro will be removed and replaced by an investment in PolicyBazaar, he said.
