BENGALURU, March 24 (Reuters) - The Indian stock market
may outperform its Asian and emerging market peers in the long
term as lofty valuations ease and investors look to bet on the
economy's growth prospects, brokerage group Jefferies said in a
note.
The benchmark Nifty 50 Index's price-to-earnings
premium to China's Hang Seng Index declined to 115% from
208% in end October, and is in line with the 10-year average of
118%, Chris Wood, global head of equity strategy, Jefferies,
wrote in his "Greed & Fear" report.
India's long-term prospects have led the global brokerage to
invest 39% of its Asia ex-Japan long-only portfolio in the south
Asian country compared with 25% in China.
While foreign investors have sold $2.8 billion on a net
basis in Indian markets so far this year, domestic equity mutual
fund inflows have remained positive, Wood said.
Domestic equity mutual fund inflows in the first two months
of 2023 amounted to 282.33 billion rupees ($3.43 billion),
according to official data from the Association of Mutual Funds
in India.
The usual challenge of relatively high valuations remain,
Wood said, adding that the brokerage will remain slightly
"overweight" on India in the Asia Pacific ex-Japan
relative-return portfolio.
"The domestic demand story certainly remains intact to
justify the continuing belief in the equity market. Loan growth
has slowed somewhat but still remains solid ... The recovery in
the residential property market also continues," Wood wrote.
Asian banking systems remain remarkably free from stresses,
Wood said, citing a slide in the ratio of non-performing loans
in Indian banks to an eight-year low.
($1 = 82.2290 Indian rupees)
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Sohini
Goswami)
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))
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