Jeffries Report: India's Equity Market Promises Robust Long-Term Returns

A Jeffries report reveals that India’s equity market offers the best long-term returns for growth-oriented investors. Despite high valuations and recent tax hikes, investor confidence remains strong, driven by increasing equity culture and significant mutual fund growth.

India's equity market presents the best long-term returns for growth-oriented investors, according to a report by Jeffries. The report underscores the attractiveness of Indian equities over both five-year and ten-year investment periods.

"This remains the best long-term opportunity for growth-oriented equity investors globally, both on a five-year view and a ten-year view," the report said. However, Jeffries highlighted the high valuations prevalent in the market, though it commended the resilience shown despite the recent capital gains tax hike in the union budget. This resilience is seen as a testament to the strong long-term outlook and investor confidence in the Indian market.

While small-cap and mid-cap valuations pose challenges, the market's ability to endure recent tax hikes is significant, the report noted. The increasing belief among Indian households in long-term equity investments was another highlight. Currently, just 5.8% of Indian household assets are in equities compared to 13.3% in bank deposits, which see a 10% annual growth.

Jeffries pointed out that India is in the nascent stages of fostering an equity investment culture. Mutual funds have become significant players in this landscape, with assets totaling Rs 67 trillion and growing at an impressive 43% year-on-year. Equity fund assets marked an even more substantial increase, rising 60% year-on-year to Rs 38 trillion by August 2024.

The report attributed the growth of the Indian stock market to strong inflows into equity mutual funds, driven largely by the popularity of Systematic Investment Plans (SIPs). SIPs have gained significant traction, with 96.1 million active accounts. August saw SIP contributions increase by 49% year-on-year, reaching a record Rs 235 billion.

In conclusion, despite challenges like high valuations, India's growth potential, alongside rising investor confidence, makes it one of the most promising markets for long-term investments, according to the Jeffries report.

(With inputs from agencies.)