Despite the recent correction in Indian stock markets, foreign institutional investors (FIIs) have been pulling out funds, shifting their focus towards China, said Chris Wood, Global Head of Equity Strategy at Jefferies. While Wood remains structurally bullish on Indian equities from a long-term perspective, he expressed short-term caution due to high FII outflows and valuation concerns.
India’s Market Outlook: A 15% Growth Potential
Wood remains optimistic about India’s stock market performance in the next 12 months, expecting the Sensex and Nifty to deliver returns of 10–15% if FIIs return to Indian markets.
“If someone has no exposure to Indian stocks, they should start buying now. When the tide turns, the rally would be very sharp. That said, we are still in a ‘sell on a rise market’ in India and not ‘buy the dips’,” he stated.
This statement suggests that while Indian markets remain attractive for long-term investors, short-term traders should tread cautiously given the prevailing market volatility.
Sectoral Preferences: Travel & Tourism in Focus
Among sectors, Wood remains bullish on travel and tourism, expecting it to outperform others in the coming years. The Indian travel sector has seen a significant post-pandemic recovery, with increased domestic and international tourism driving growth in hospitality, aviation, and related industries.
Meanwhile, despite the sharp correction in real estate stocks since September 2024, Wood has not altered his exposure to the sector in his long-only India portfolio. His stance suggests confidence in the long-term growth potential of India’s real estate market despite short-term price fluctuations.
FII Selling & Market Valuations: A Surprise Factor
One of the major concerns for the Indian stock markets has been the significant FII sell-off, which Wood admitted took him by surprise.
Historically, Indian equities have been a preferred investment destination for foreign investors, but with China reopening its economy and offering attractive valuations, global funds seem to be diverting capital towards Chinese markets instead.
While Chris Wood maintains a long-term bullish view on Indian equities, he advises investors to remain cautious in the short term due to high valuations and foreign investor outflows. However, for those looking to build exposure to Indian markets, he suggests that now is a good time to start investing, as a strong rally could follow when FII sentiment turns positive.
With expectations of 10–15% returns over the next 12 months, market participants will closely monitor global investment trends and FII flows, which remain crucial to the trajectory of Indian equity markets.
