India’s underperformance to emerging markets a "relative disaster," not absolute: Chris Wood, Jefferies

However, the reason Woods terms India's performance as a "relative," not "absolute" disaster, is the "continuing remarkable resilience of domestic inflows." For the first ten months of the year, Indian equity mutual funds recorded a net inflow of Rs 3.7 lakh crore, while seeing inflows of Rs 32,100 crore in October.

While including other domestic institutional and retail flows, total domestic inflows have averaged an estimated $7.4 billion a month in the first nine months of 2025. "The result is a continuing pattern whereby the domestic inflows are offsetting new equity supply which is still running at an
average of $5.7 billion in the past three months," noted the report.

Further, Woods argued that from a stock market standpoint, the key issue is whether the credit and monetary easing seen this year, combined with the lowering of GST rates effective from 22 September, leads to a pickup in growth, particularly nominal GDP growth, in coming quarters as it should do. He pointed to the rise in credit growth from 9 percent YoY in May to 11.5 percent YoY in mid-October as the best evidence of an upturn.

"In the absence of such an anticipated cyclical pickup Indian equity valuations in aggregate will be increasingly vulnerable," said the Jefferies analyst. However, the one area where valuations look attractive is the property sector.

According to the international brokerage, the residential property cycle has further to run and that the best positioned developers remain remarkably underleveraged and should continue to benefit from the consolidation triggered by the Real Estate Regulation and Development Act of 2016. Many developer stocks, such as Godrej Properties, are trading significantly below their long-term average valuation.

Jefferies added that from a global emerging market perspective, India has become a reverse AI trade, meaning it could outperform if the AI-driven rally unwinds, which is a scenario that would hurt Taiwan, Korea and China, which together make up 61.8 percent of the MSCI Emerging Markets Index, compared with India’s 15.3 percent weight.

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