India might draw in equity inflows of $50-70 billion within the next year, helped by sustained investment by mutual funds and systematic investment plans (SIPs), global brokerage Jefferies said on Friday.
The brokerage added that although foreign investor exposure at present is at multi-year lows, India still is the most compelling structural growth opportunity among the emerging markets.
In its most recent 'Greed & Fear' report, Jefferies characterized 2025 as a year of "healthy consolidation" for Indian equities. The company further said that strong domestic flows via mutual funds and SIPs will likely soak up most of the foreign capital coming in and will help support overall market momentum.
Further down the track, Jefferies is forecasting 2026 as a potential time when another market rally can begin, as economic growth accelerates. Recent government policy initiatives, such as large-scale Goods and Services Tax (GST) cuts, are catalysts for greater consumption and liquidity within the economy.
Meanwhile, the US Federal Reserve's rate cut has enhanced the chances of the Reserve Bank of India coming out with yet another round of easing before the end of the year. "There still remains a possibility that the 10-15 per cent return target ends up being too conservative," said the report, attributing the combined impact of GST reductions, potential RBI rate actions, and better corporate earnings.
The brokerage also emphasized that small- and mid-cap stocks continue to reflect better earnings growth than their larger counterparts despite high valuations. "India's small to mid-cap universe, even with higher valuations, continues to offer higher earnings growth potential, which warrants the positioning," Jefferies emphasized.
Generally, the company emphasized that India's distinctive combination of robust local demand, improving corporate profitability, and accommodative policy measures strengthens its position as the most appealing growth narrative among global equities.
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