Global brokerage Jefferies, in its latest research note, has said that India continues to stand out as a strong candidate for long-term wealth creation. This comes at a time when the Nifty has slipped 0.65 percent over the past year and both small- and midcap indices have corrected, raising concerns among retail and institutional investors. Despite this underperformance, the brokerage believes India is well-placed to regain momentum as valuations normalise and earnings downgrades ease.
One of the biggest triggers for recovery, according to Jefferies, is the recently approved GST 2.0 reforms. The automobile sector is expected to emerge as the biggest beneficiary, with demand projected to pick up after September 22, when the revised GST rates are implemented. Auto stocks have already rallied in anticipation of higher sales and are likely to sustain this momentum in the coming months.
Jefferies forecasts corporate earnings in India to grow at an average of 10 percent annually between FY26 and FY27. The brokerage added that a sharp decline in India’s valuation premium compared to other emerging markets is creating attractive entry points for investors. It also cautioned against extreme investment bets, instead highlighting that “compounder” stocks, those with consistent long-term returns, have delivered the most reliable results in 2025 so far.
While large-cap counters show limited upside, Jefferies sees strong opportunities in midcap and small-cap stocks, which it believes can deliver outsized returns as the domestic growth story strengthens. The firm also noted that laggard stocks and multibaggers could generate strong alpha, particularly in an environment where valuations are stabilising.
Apart from equities, regulatory changes by the Securities and Exchange Board of India (SEBI) have sparked renewed interest in specialised investment funds (SIFs). These funds, which allow unhedged short positions of up to 25 percent of net asset value, have seen growing participation from high-net-worth individuals, especially amid flat market returns.
Jefferies announced that it is launching new long-short and short-only strategies under this category, with a focus on factors such as momentum, earnings revisions, free cash flow, valuations, and company size.
Overall, the brokerage remains positive about India’s long-term trajectory, underlining that the combination of GST reforms, earnings growth, and stable valuations provides a strong base for wealth creation. While short-term volatility may persist, Jefferies stressed that India remains one of the most promising markets globally for investors willing to stay the course.
