Jefferies Bets on Large-Caps as FPIs Return, Picks RIL and HDFC

Foreign Flows Put India’s Largest Stocks Back in Focus

Jefferies sees large-caps as the clearest beneficiaries if foreign investors’ return to Indian equities gathers pace.

A sharp change in flows, but not yet a confirmed trend

The early-November buying follows net FPI equity sales of ₹2.95 trillion through October, which the source describes as the worst year for outflows. The contrast is striking, but a short buying window does not by itself establish that foreign investors have changed their longer-term view of India. The scale and persistence of subsequent flows will matter more than a few days of data.

Jefferies’ case for large-caps rests partly on their greater liquidity and higher FPI ownership, which could make them more direct beneficiaries if overseas money returns. The brokerage also points to the Nifty 100’s one-year forward price-to-earnings multiple of 18.6, around 5% below its 10-year average. That makes valuations look more reasonable by this measure, though it does not ensure that prices will rise.

Three screens shape Jefferies’ stock selection

The brokerage’s preferred names are based on three measures: where FPI outflows have been greatest, where foreign ownership has declined most and where investors’ relative positioning has weakened. The screens highlight financials in particular. Jefferies estimates that the sector saw the largest outflows, at $17 billion, followed by consumer staples at about $11 billion and energy, autos and IT at roughly $9 billion each.

At the stock level, Reliance Industries and HDFC Bank each recorded estimated outflows of about $8 billion, with ICICI Bank and Axis Bank at $5 billion each. Kotak Mahindra Bank and M&M were also among the companies with substantial outflows. Jefferies’ separate ownership screen found FPI ownership across BSE 500 stocks at 17.3%, its lowest level in 10 years. Max Healthcare, Axis Bank, Paytm and 360 One WAM were among the stocks with the sharpest declines in ownership.

The reversal case extends beyond past selling

A third screen tracks relative positioning against the MSCI India index. HDFC Bank had the largest reduction in relative overweight, falling 2.4 percentage points to 1.0 percentage point. Jefferies also noted lower positioning in Axis Bank, Kotak Mahindra Bank, Reliance Industries and JSW Energy. At the sector level, Industrials and Financials saw the largest declines in relative positioning.

Jefferies says a potential reversal in the AI trade, possible equity tax relief, resilient domestic macro conditions, reasonable large-cap valuations and light positioning could help sustain foreign flows. These are potential supports, not confirmed developments or guarantees. If buying continues, the brokerage argues that large-caps may benefit more directly; if flows fade, stocks selected because of past outflows could remain exposed to volatility.

Its named plays include Reliance Industries, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Max Healthcare, JSW Energy, UltraTech Cement, IndiGo, Varun Beverages, IHCL, DLF and Sona BLW. The list spans several sectors, but the screens are primarily about potential sensitivity to an FPI reversal—not a prediction that every company will attract fresh buying or outperform.

Key Highlights

• FPIs bought ₹53,739 crore of Indian equities in the first nine days of November, after net sales of ₹2.95 trillion through October.
• Jefferies sees liquid, FPI-owned large-caps as the more direct beneficiaries if foreign buying persists.
• The Nifty 100 trades at 18.6 times one-year forward earnings, around 5% below its 10-year average, according to the brokerage.
• Financials led estimated sector outflows, while FPI ownership across BSE 500 stocks fell to 17.3%.
• Jefferies’ preferred names include Reliance Industries, HDFC Bank, Axis Bank and companies across other sectors.

Investor Note: Jefferies’ list identifies stocks that may be sensitive to a foreign-flow recovery; it is not evidence that such a recovery is assured. Investors should weigh individual company fundamentals, valuations and risk tolerance rather than treat past FPI selling or a broker’s screen as a standalone buy signal.