Indian markets can rise 15% in a year; FII selling surprised me: Chris Wood

Speaking at BS Manthan, Wood said he remains structurally bullish on Indian equities from a long-term perspective; but cautious in the short-term given the quantum of FII outflows and valuation woes.

Despite the recent correction in the Indian stock markets, foreign money, as per Chris Wood, global head of equity strategy at Jefferies, is likely to chase China rather than India in the short-to-medium term.   

    Though Wood remains structurally bullish on the Indian equities from a long-term perspective, from a short-term view, he remains cautious given the quantum of foreign investor (FII) outflows and valuation woes.  That said, he expects the Indian frontline indices – the Sensex and the Nifty – to give a 10 – 15 per cent return from the current levels from a 12-month perspective if FIIs were to return to Indian shores.  “If someone has no exposure to Indian stocks, they should start buying now. When the tide turns, the rally would be very sharp. That said, we are still in a 'sell on a rise market' in India and not 'buy the dips',” he said.  Wood remains bullish on the travel and tourism space, which he thinks can give superior return as compared to other sectors. Despite the sharp correction seen in the stocks of the real estate sector since September 2024, he has not changed his current allocation to the sector's stocks in his long-only India portfolio.    “Indian markets’ valuation was very high at its peak. But, the massive selling by foreign investors has surprised me. While the first phase of the FII selling could be linked to fund rotation towards a cheaper Chinese market, the second bout of selling came amid positive news flow around DeepSeek,” Chris Wood said at BS Manthan in New Delhi.  DeepSeek, a China-based artificial intelligence (AI) company, showcased Asia’s largest economy’s prowess in the technology sector with its inexpensive AI-based language models.  “So, if any emerging market fund manager hadn't already bought China until then, it gave them a reason to do so,” Wood added.  In calendar year 2025 alone, foreign investors have offloaded Indian stocks worth over Rs 1 trillion. The domestic institutional investors (DIIs), including mutual funds, meanwhile have pumped in Rs 83,000 crore during the period.  Wood believes the remarkable strength in the domestic flow that has, thus far, aided the domestic equity markets may reverse if local investors continue to see year-on-year decline in their investments.  The macro issue for the Indian economy, Wood said, is whether India’s private sector will take over the baton, applying the analogy of a relay race, in order to drive a broader capex cycle.  “However, there is a growing doubt of the lack of capex coming from the private sector, which has been disliked by the markets,” Wood said.    Gold, he said, is reaching the level where it should have been 10 years ago. The real reason, he said, for the gold price rising was blocking of the reserves of the yellow metal by Russia. A stronger dollar, Wood believes, was also aiding sentiment.  “Short-term risks for gold are the settlement of the Russia – Ukraine war, but it is still a good long-term bet. Between bitcoin, which I expect to rise to $150,000 levels, I would still prefer an investment in gold,” he said.  US-China bonhomie  China, Wood said, is seeing ‘normalisation of flows’ into its market amid multiple headwinds, including support from the Chinese government.  The already cheap Chinese stock markets, Wood said, bottomed out in the fourth quarter of 2024 (Q4-CY24) with the central bank doling out stimulus to stabilise demand, especially in the housing sector, along with the government asking companies to buy back their shares.  “With Donald Trump returning to the White House, I think the US-China relationship will improve and not get worse as Trump is a business guy and not a security guy. My view, however, is that Donald Trump is not anti-China or Chinese people. He will use tariffs as a threat to bring Chinese business into the US,” he explained.