The Indian equity market, which has witnessed a remarkable rally since April 2025, may now be heading towards risky territory. This cautionary note has come not from a market bear, but from one of the biggest bulls of Indian equities — Christopher Wood, the renowned strategist from Jeffries. Known for his bullish stance on emerging markets and particularly India, Wood has now expressed concerns that valuations have reached dangerous levels, and the heavy supply of equities could derail the rally.
Since April 2025, the Indian stock market has delivered impressive returns despite occasional volatility. The Nifty 50 index has risen by 14%, while the Bank Nifty has returned around 10%. The Nifty Midcap index has outperformed with a massive 24% gain. However, this sharp upward momentum has created a new problem: soaring valuations.
The Nifty is now trading at 22 times its forward 12-month earnings — a 14.1% jump compared to April. The Nifty Midcap 100 index is even more stretched, trading at 27.1 times forward earnings — a 23.7% surge since April. According to Christopher Wood, valuations in midcap stocks have become a serious concern.
Adding to the worry is the heavy selling by promoters, private equity firms, and venture capitalists, who are cashing in on these elevated valuations. In May alone, promoters and private equity players sold shares worth $2 billion. The pace has accelerated in June, with another $1 billion worth of shares being offloaded in just the first two weeks. This means that every month, the market is seeing an influx of more than ₹500 crore worth of new share supply, mostly from large, well-informed investors rather than small retail investors.
When we look at some of the large recent deals, the situation becomes even clearer:
The promoters of Vishal Mega Mart sold a 19.6% stake worth ₹10,220 crore to mutual funds.
Bajaj Finserv’s promoters sold shares worth approximately ₹5,500 crore.
Reliance Industries offloaded its stake in Asian Paints worth ₹9,580 crore.
Vedanta sold ₹328 crore worth of shares in Hindustan Zinc.
This trend indicates that promoters and large investors are taking advantage of high valuations to exit the market. According to Wood, this surge in equity supply is the biggest risk to the ongoing rally. When supply begins to outpace demand, the rally can lose steam and may even reverse into a correction. Historically, heavy promoter selling has often preceded market downturns, as insiders typically have the best sense of when valuations have become excessive.
However, Wood still maintains selective optimism. Despite his caution, he continues to have confidence in a few sectors. Jeffries' India portfolio currently has a 19% weightage in real estate. According to Jeffries' analyst Abhinav Sinha, top seven developers could see pre-sales growth of up to 22% in FY26. The BSE Realty index is still 14% below its June 2024 highs, suggesting room for further gains.
This week, Wood has made adjustments to his portfolio. He has added stocks such as Larsen & Toubro, Thermax, and Godrej Properties. Additionally, he has increased his positions in TVS Motor, Home First Finance, Manappuram Finance, PB Fintech, and Bharti Airtel. These moves indicate a shift in focus from capex-driven stocks to consumption-based stocks.
Wood believes that the current market rally is also supported by the Reserve Bank of India’s (RBI) dovish policies under new Governor Sanjay Malhotra. This policy stance has provided a boost to consumer finance stocks like Bajaj Finance, which has gained 35% this year.
Christopher Wood’s warning serves as an important signal. When even a bullish long-term investor grows cautious, it's a cue for regular investors to carefully assess their positions. Investors should not ignore Wood’s insights, especially regarding the balance between supply and demand in the market. It's advisable to stay vigilant, understand the underlying market dynamics, and adjust investment strategies accordingly.
This article is prepared purely for informational purposes. Please consult your financial advisor before making any investment decisions.
Disclaimer:
This article is for informational purposes only and should not be considered as financial advice. Investing in the stock market involves risks. Readers are advised to consult with their financial advisor before making any investment decisions based on this information.
