© Reuters. FILE PHOTO: A general view of the Bombay Stock Exchange (BSE), after the Sensex broke above the 50,000 level for the first time, in Mumbai, India, January 21, 2021. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – The Indian stock market could outperform its Asian and emerging market peers in the long term as lofty valuations ease and investors look to bet on the economy’s growth prospects, brokerage group Jefferies said in a press release. a note.
The benchmark Nifty 50 index’s price-earnings premium to China declined from 208% to 115% at the end of October, and is in line with the 10-year average of 118%, wrote Chris Wood, global head of Jefferies stock strategy. in his “Greed & Fear” report.
India’s long-term prospects have prompted the global brokerage to invest 39% of its Asia excluding Japan long-term portfolio in the South Asian country compared to 25% in China.
While foreign investors have sold $2.8 billion net in Indian markets so far this year, inflows from domestic stock mutual funds have remained positive, Wood said.
Domestic stock mutual fund inflows in the first two months of 2023 amounted to 282.33 billion rupees ($3.43 billion), according to official data from the Association of Mutual Funds in India.
The usual challenge of relatively high valuations remains, Wood said, adding that the brokerage will remain slightly “overweight” India in the Asia Pacific ex-Japan relative performance portfolio.
“The domestic demand story certainly remains intact to justify continued belief in the stock market. Loan growth has slowed a bit, but remains robust… The recovery in the residential real estate market continues as well,” Wood wrote.
Asian banking systems remain remarkably stress-free, Wood said, citing a drop in the ratio of non-performing loans at Indian banks to an eight-year low.
($1 = 82.2290 Indian rupees)