Jefferies’ recent report underscores how regular mutual fund contributions—especially via Systematic Investment Plans (SIPs)—are providing vital support to India’s equity markets, helping avert a sharp downturn despite sizable capital exits. The report estimates that SIPs are soaking up US$6-10 billion per month in available equity supply.
Looking ahead, Jefferies projects that approximately US$50-70 billion of fresh equity supply is likely to enter the market over the next 12 months. Even so, given the ongoing inflows, valuations, and exit activity by corporates and private equity investors, the market is expected to trade largely in a sideways range for the remainder of the year.
Some of the key observations:
- From the start of the fiscal year (April), mutual funds have accumulated around US$21 billion in inflows, with nearly US$3 billion/month coming through SIP arrangements.
- Corporate and PE players are actively exiting stakes, attracted by current valuation levels. Because of this, the supply of equities isn’t anticipated to diminish anytime soon.
- India’s forward-P/E for MSCI India is about 22×, rising to about 25× once financials are excluded — signaling stretched valuations.
Despite these headwinds, Jefferies remains upbeat on India’s long-term narrative. The report describes India as one of the most compelling structural growth cases in global equities. Small- and mid-caps are viewed as areas of opportunity given the ongoing equity issuance and increasing investor base.
