Private equity investments to thrive in India despite global challenges: Jefferies report

India will remain a prime market for listing private equity (PE) investments, suggesting a huge pipeline for investment bankers globally, according to a latest report by global brokerage firm Jefferies.

Despite the challenges the private equity industry faces, such as liquidity squeeze and declining distributions from major firms, India will remain a favourable environment for capital raising and investment opportunities.

“This year a report, suggests a potentially huge pipeline for investment bankers globally but will there be the demand for all the stock and at what valuations. For now, as previously, the best market for listing PE investments remains India,” the report said.

The possibility of a renewed easing cycle by the US Federal Reserve may provide relief to the private equity sector. However, the report raises concerns about global economic downturns that may accompany lower interest rates.

In a previous Jefferies report, as quoted by ANI, it was observed that India's stock market has shown remarkable resilience and growth, especially after the general election results.

The report said India's stock market capitalization stood at 145 per cent of GDP as of July 2024, an increase from 52 per cent in March 2020. However, this valuation may not be considered cheap; it does not warrant a sell-off from a long-term perspective.

According to the report, the Indian market is now capitalized at approximately USD 5.2 trillion, a 296 per cent increase from its lowest value of USD 1.3 trillion in March 2020. This indicates growth in a domestic demand-driven story.

"While stock market capitalisation is now 145 per cent of GDP, up from 52 per cent in March 2020. That is no longer cheap. But it is not a reason to sell, save from the most short-term or tactical standpoints," ANI quoted the report.

According to the report, the Indian market has transformed with the growing participation of retail investors through Systematic Investment Plans (SIPs) and the National Pension System (NPS). This shift shows the development of the "cult of the equity" observed in the US since the 1980s, reflecting a positive future for equity investments in India.

(With inputs from ANI)