MUMBAI – Following a significant market correction, global brokerage Jefferies noted that Nifty 50 valuations have reverted to their long-term averages. In its latest India strategy report released on April 2, 2026, the brokerage argued that risk-reward is turning attractive and subsequently adjusted its model portfolio to favor defensive and value-oriented sectors.
According to Jefferies, the Nifty’s 12-month forward price-to-earnings (P/E) multiple has dropped to approximately 17x, aligning closely with the pre-Covid average (Jan 2015–Feb 2020) and trading at a 12% discount to the last five years.
Portfolio Tweaks: The Winners and Losers
Jefferies has rotated its “India Model Portfolio” to better navigate current geopolitical tensions and high oil prices.
Three Market Scenarios for FY27
Jefferies outlined a roadmap for the Nifty based on how the West Asian conflict and the Strait of Hormuz closure evolve:
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Base Case (Target: 25,000): Assumes the conflict is resolved within a month. Forecasts 10% upside from current levels with a recovery to an 18x P/E multiple.
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Bull Case (Target: 28,000): Presumes rapid normalization. Forecasts nearly 23% upside as multiples re-rate to post-Covid averages of 19.7x.
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Bear Case (Target: 22,400): Assumes persistent high oil and supply disruptions beyond June. Predicts flattish performance as valuations remain suppressed at 16.8x.
The “Earnings Yield” Gap
A key observation by Jefferies is that the gap between government bond yields and the Nifty’s earnings yield has narrowed to 1.2 percentage points (below the 10-year average of 1.4). This suggests that despite high interest rates, equities are no longer “expensive” relative to bonds, making them a viable alternative for long-term capital.
“Expectations of 4-5% earnings cuts have already been built into current prices,” the report noted, suggesting that the recent 13% year-to-date decline in the Nifty has already flushed out much of the valuation froth.
