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Why Jefferies’ Chris Wood is bullish on Indian stock market


Turning to things outside the US, GREED & fear remains firmly of the view that an externally driven correction in India creates a buying opportunity, said Jefferies’ Chris Wood in a note, who sees India’s benchmark BSE Sensex to hit 100,000 on a five-year view i.e., by late 2026. 

“If the current housing upturn proves to be the lead indicator of a broader private sector Capex cycle, then India should once again become one of the best-performing stock market in Asia,” the Greed & fear note stated.

This, therefore, raises the issue of how much the stock market can rise in coming years. GREED & fear signaled that a target of a Sensex at 100,000 is now eminently achievable on a five-year view assuming a trend 15% EPS growth and that a five-year average multiple of 19.4x is maintained.

Though, there are obvious risks of further corrections in India, the note highlighted. “The two main risks to Indian equities are external. This is the Fed tightening cycle and a further spike in the oil price.”

One of the reasons cited by Wood for stability is that India has higher foreign exchange reserves than in the past with foreign reserves currently at $634 billion which is equivalent to 13 months of imports, which is important because the accelerating growth dynamic means that the current account deficit is rising rapidly as non-oil and non-gold imports have been growing rapidly.

“No one should be surprised to see markets rally after the tumultuous January. Bear markets need pauses to refresh just as bull markets climb walls of worry. The bear market thesis in the US is clearly a hypothesis and not an assertion, and is contingent on a continuing seeming Federal Reserve commitment to engage in meaningful monetary tightening,” Wood added.

Further, Greed & fear remains most encouraged by the conclusive evidence last year that a housing cycle has commenced after a seven-year downturn, as discussed here on several occasions previously. 

“This should translate in due course into a broader capex cycle which should be earnings positive and mean the stock market will prove to be surprisingly resilient in the face of rising interest rates,” the note stated.

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