Jefferies is sounding the alarm on soaring stock valuations in India—especially in the midcap space—and it’s acting fast.
Since the April lows, Indian equities have been on a tear. The benchmark Nifty 50 is up 14%, trading at 22.2 times its 12-month forward earnings. But that’s not even the biggest concern. The Nifty Midcap 100 has surged nearly 24%, pushing its valuation up to 27.1x. For Jefferies, this is a red flag.
In his latest Greed & Fear note, Chris Wood, Jefferies’ Global Head of Equity Strategy, said what many on the Street have been whispering—valuations are once again becoming a problem.
Portfolio Shake-Up: Out with the Old, In with the Bold
With this in mind, Jefferies is reshuffling its long-only India portfolio. It’s saying goodbye to Larsen & Toubro, Thermax, and Godrej Properties. And instead, it’s welcoming TVS Motor, Home First Finance, and Manappuram Finance—each with a 4% portfolio weight.
Not just that—PolicyBazaar and Bharti Airtel are getting a bump in weight by 1% each. Jefferies is clearly betting on consumption and financial services, especially as investor focus shifts after the 2025 Union Budget.
The budget’s tax relief has triggered a sector rotation—from investment plays to consumption stories. That’s why consumer finance stocks like Bajaj Finance, which is already up 35% in 2025, are getting hot again.
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Midcap Frenzy: Overheating Warning Signs?
Jefferies also highlighted a major risk: massive stake sales. In May and June alone, companies and promoters have offloaded $13.2 billion worth of shares. That’s a lot of supply flooding the market, and it can weigh on prices.
It’s not all gloom though. While private capital expenditure (capex) has slowed down, Jefferies isn’t giving up on the story. Wood believes this cycle will be longer and more steady—not a wild boom like the one from 2003 to 2017.
Bullish on Real Estate—and Why That Matters
One area where Jefferies remains confident? Real estate. Despite cutting Godrej Properties from its picks, the firm is still all-in on the property market. With mortgage rates now at 8% and possibly falling to 7.5%, demand in the affordable and mid-income housing segments looks promising.
The BSE Realty Index has already spiked 35% since April 7—and Jefferies holds a chunky 19% weighting in property developers in its India portfolio.
If you’re watching the markets and trying to decode the next big move, Jefferies’ latest reshuffle speaks volumes. As valuations heat up, the firm is staying nimble—betting on consumption, finance, and smart rotation. Are you?
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