$320 billion danger: Jefferies warns 70 large EM funds are underweight India

Jefferies analysis of 70 large EM funds (~$320B AUM) shows 61% are underweight India by 0.4 percentage points versus MSCI EM benchmark, a sharp departure from the 10-year average overweight of 2-3 percentage points. Key concerns include MSCI India trading at 19.8x forward P/E (70% premium to EM peers) despite EPS growth lagging EMs by ~49 percentage points in CY26E, INR weakness (down ~5% YTD in CY26, ~13% since Sep 2024), and a projected 10% deficient monsoon raising El Niño risks. The brokerage recommends a pivot toward hard assets—power utilities, hospitals, airports, and real estate—with top picks including JSW Energy, Adani Ports, AESL, Premier Energies, GMR Airports, Lodha, and Godrej Properties.