New Delhi, Oct 10 (IANS) The Indian equity market is likely to outperform its regional benchmark index despite a 15.6 per cent fall in dollar terms this year, a report has said, while pegging earnings growth to increase up to 17 per cent next fiscal year.

According to a report by Jefferies' Asia Maxima -- authored by global head of equity strategy Chris Wood -- a 12 per cent allocation to India against a 10.5 per cent weight in the MSCI AC Asia Pacific ex-Japan index was recommended.

In local currency terms, Nifty is down 13.4 per cent and ranks as the second-worst-performing market behind Indonesia having lost 42.3 per cent of value.

The structural growth story remains intact and data is remarkably resilient, it added.

Apart from that, Wood has expected 6.5-7 per cent real GDP growth and 11-12 per cent nominal growth in FY27 with earnings growth rising from 14 per cent this year to 17 per cent next fiscal.

However, the report flagged heavy share issuance as key upside cap with monthly equity issuance rising to $9.5 billion in August from $1.0 billion in April, absorbing mutual fund inflows of Rs 38,800 crore per month.

"India was maintained as a slight overweight last quarter on evidence of a cyclical rebound in domestic demand. The neutral weighting has declined from 18.6 per cent at the end of 2024 to 10.5 per cent. Still even after the recent underperformance, India has outperformed the Asia Pacific ex-Japan benchmark by 17 per cent since April 2020. However, valuations are still at a premium to the rest of the region," the report said.

MSCI India trades at 20.5 times 2026 expected earnings against 12.4 times regional average, it said.

The report further highlighted that bank credit expanded 18.1 per cent year-on-year as of mid-September, corporate loans rose 21.6 per cent in August, loans to small, medium and micro enterprises grew 25.5 per cent and deposits expanded 17.3 per cent.

While pickup in corporate lending suggests long-anticipated private sector capex cycle may finally be occurring, it said.

Moreover, machinery imports totalled $66 billion in 12 months ended August against $29 billion in FY21.

Other evidence includes GST collections up 14.8 per cent in August, power consumption up 9.4 per cent in April-August against 1.8 per cent in January-March and residential property sales in top seven cities up 7 per cent in first eight months against 1 per cent decline in 2025.

Wood also highlighted that the Indian rupee may have bottomed after 10.7 per cent decline since early 2025.

--IANS

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