Jefferies Spots Fall Risk in Dalal Street

India might be cheaper now than it was four months ago, but Chris Wood, global head of equity strategy at Jefferies, is not just celebrating bargains. He is also scanning for red flags, particularly redemptions.

- Dipti Sharma

The big question on his mind: Will domestic institutional investors (DIIs) keep buying? "Based on my discussions with mutual fund companies last week, they don't see those signs (of redemption) yet, as I asked them directly," he told Mint.

Drawing from his latest "Greed and Fear" report and conversations in Mumbai last week, Wood noted that there is confidence that these inflows will continue. However, he cautioned, "The real risk will arise if and when investors begin to see year-on-year losses in their portfolios."

Broadly speaking, he believes the risk of further corrections persists. While India has already experienced a substantial correction that contributed to the slowdown, he sees the bigger threat now looming from external forces—particularly the US.

Another critical variable? The dollar. He expects a peaking out in the dollar. The peaking of the dollar will give more room for the RBI to ease, which it has already started doing, he says. "But if I am wrong on the dollar, it's going to be more negative not just for Indian equities but for all emerging markets."

On the India vs China debate, Wood highlighted a clear trend: investors have been steadily reducing their exposure to India over the past few months while increasing allocations to China. "I have been adding to China since then and increased my allocation further after the DeepSeek news. But overall, this foreign selling in India is clearly a rotation into China," he said.

Edited excerpts of the interview:

Your latest Greed and Fear report suggests that you are not concerned about a structural slowdown in the market and the economy. What is your perspective on India Inc.'s weak corporate earnings?

Yes, there has been a cyclical slowdown, but a structural slowdown is not something I am concerned about.