GREED & fear report: Chris Wood of Jefferies, in his recent GREED & fear report, highlighted that for India, the more pressing issue is whether foreign investors return — and what could trigger that shift.
Wood noted that foreign investors are most likely to return either after a decisive correction or a clear unwind in global hardware tech stocks. Yet there is little evidence of stress in domestic flows.
India’s equity market is navigating a delicate phase where domestic flows are doing the heavy lifting while foreigners remain cautious. The Nifty has declined 5.8% since its early January peak, while MSCI India is down 8.3% in rupee terms from its September 2024 high. Despite this, domestic equity mutual funds recorded $51 billion in inflows in 2025, with $4 billion in January alone. Meanwhile, National Pension System (NPS) flows are already running at $1.4 billion per month and are projected to rise, said Wood in his .
“There remains a lack of evidence of any sudden sharp decline in flows into the Systematic Investment Plan () schemes where the average monthly contribution was ₹305 billion ($3.4 billion) for the three months to January or only ₹3,140 ($35) per account,” he added.
While macro concerns persist—including limited fresh foreign direct investment and continued private equity exits—Wood argued the equity story remains compelling. Net FDI was nearly zero in FY25 and just $4 billion in the first nine months of FY26, while “fresh” FDI excluding reinvested earnings was only $10 billion during that period, compared to $42 billion in FY20, informed the report.
Earnings Acceleration Strengthens the Equity Case
Beyond liquidity, Wood highlighted improving earnings momentum as the core equity driver
“Earnings growth for the universe of 198 companies under Jefferies coverage accelerated from 15% YoY in 3QCY25 to an 8-quarter high of 18% YoY in 4QCY25, while revenue growth improved to an 11-quarter high of 16% YoY,” he said.
Jefferies expects 15% growth for the MSCI India universe in the coming fiscal year, up from an estimated 10% in FY26. This marks a sharp improvement from the 3–10% range seen over the prior five quarters before rising to 13% last quarter.
Even at the smaller end of the market, earnings momentum appears healthy. The Nifty Microcap 250 Index delivered 12% YoY sales growth and 24% YoY net profit growth in the latest earnings season.
IT sector at risk
Wood also warned that structural questions loom over India’s IT services industry, which employs around 6 million people. Jefferies’ software analyst maintains an Underweight stance, with Infosys trading at 17.2x forward earnings.
“Leveraged buyouts of software companies are self-evidently risky given the lack of tangible assets that can be collateralised,” Wood remarked, reflecting broader concerns around private equity exposure to tech.
Domestic flows take charge
Ultimately, Wood argues the most compelling story for Indian equities is not foreign capital or macro tailwinds—but persistent domestic inflows and improving corporate earnings.
“The best story for the remains the continuing evidence of inflows with the mutual fund industry and related wealth management industry having claim to be India’s most successful industry,” he concluded.
In portfolio terms, he made one change: will be replaced by consumer finance company , reinforcing a tilt toward domestic growth and financial deepening.
For investors, the message is clear—India’s equity narrative is increasingly homegrown, earnings-led and structurally resilient, even as global uncertainties persist.
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