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Jefferies on India: Brokerage warns of 'valuation bubble' after Sensex, Nifty soar 14% from April lows
- Written by ZeeBiz WebTeam
Published: 6:30 PM, May 16, 2025
|Updated: 6:30 PM, May 16, 2025
With the Sensex and Nifty50 rising more than 14 per cent from their April lows and approaching their all-time highs, Indian stock markets are exploding. However, leading international brokerage Jefferies has issued a warning, stating that valuations are once again "expensive." MSCI India is currently trading at a steep 22.9x price-to-earnings, which is 17 per cent higher than the 10-year average.
Because it sees little upside due to earnings downgrades, NIM pressures on banks, and weaker IT outlooks, the firm has reduced its overweight position in financials and switched to defence and cement stocks.
(Image: Pexels, Unsplash, PTI)
1/10
Nifty, Sensex rally over 14% from April lows
Indian markets are now just 5 per cent shy of their September 2024 peaks, driven by cooling geopolitical tensions and global cues.
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Valuations turn 'expensive again', says Jefferies
MSCI India now trades at 22.9x PE—17 per cent above its 10-year average, triggering caution for fresh investors.
3/10
Non-financials lead valuation spike: PE at 26.1x
While lending financials remain below average, non-financial valuations have surged 27% above historical norms.
4/10
India–US trade deal chatter could fuel more gains
Trump’s Qatar comments on tariff-free access from India could trigger bullish sentiment if formalised, according to Jefferies.
5/10
Domestic inflows soft, but SIPs show early signs of revival
April 2025 mutual fund inflows were 50% below Oct 2024 levels, but SIPs have begun to inch up again.
6/10
Equity supply could rise with fresh domestic flows
Jefferies warns that any pickup in inflows might be offset by increased equity supply in coming quarters.
7/10
Q4 results: EPS growth expectations take a hit
Earnings growth for FY26 is now seen at 11 per cent, down 1.1 per cent due to weak IT and bank margins.
8/10
Upgrade/downgrade ratio weakens in FY26 outlook
While Q4 beats improved, earnings downgrades still outpace upgrades due to sectoral headwinds
9/10
Jefferies trims financials, adds defence and cement
The global brokerage has reduced its overweight in financials and shifted focus to defence and infra themes.
10/10
Is this rally sustainable? Jefferies strikes cautious tone
While momentum is strong, elevated valuations and weak earnings momentum demand selective participation.
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