Indian markets may see short-term bounce, Jefferies says with its top bets

The Indian equity market may be set for a short-term rebound after lagging the MSCI Emerging Markets (EM) Index by 24 percentage points over the past year, according to Mahesh Nandurkar, MD and Head of Research at Jefferies India.Since mid-April 2025, the MSCI India Index has underperformed the MSCI EM Index by 18 percentage points, coinciding with signs of slowing economic growth, weaker corporate earnings, and a 3% fall in the rupee.

Historically, such a steep underperformance of 15-20% or more has often been followed by a relative bounce. The current 24-percentage-point gap is the largest in the last 15 years on a trailing 12-month basis.

Jefferies sees the rebound being supported by three factors—- Relative valuations returning to their long-term average

– Strong inflows from domestic investors
– An expected sharp year-on-year earnings growth in the September 2025 quarter due to a low baseA potential resolution of trade disputes with the US could also act as a trigger. However, Jefferies warns that the rally may not last long, citing concerns over the value-versus-growth trade-off and fresh equity supply.

September quarter outlook

The brokerage expects the September quarter to be strong, aided by last year’s low base caused by elections, which had dampened government spending. Early monsoon onset, external trade challenges, and geopolitical tensions had weighed on June quarter earnings and key economic indicators.

This year, Diwali falls 12 days earlier, meaning some festival demand will be captured in the September quarter rather than December, likely providing a temporary sentiment boost.

Stock ideas

For the near-term bounce and beyond, Jefferies favours recent laggards such as Lodha, Cholamandalam, Adani Energy, Shriram Housing Finance, Jubilant, Mankind, NTPC, and Crompton.

The brokerage also maintains a high-conviction call on cement stocks, expecting a pricing-led recovery.