Shock India election results, tax tweak may trigger equity correction, Jefferies says

** A "surprisingly bad outcome" in national elections, and any changes in capital gains tax in upcoming July budget could act as triggers for a near-term correction in Indian markets, Christopher Wood, global head of equity strategy at Jefferies says

** While a shock BJP defeat in 2024 elections is "extremely unlikely", markets could correct even more than the 17% fall in two sessions after the election results in 2004, in case of a repeat of such a shock result, Wood says

** India's national election results are due on June 4; ruling BJP is expected to return to power

** Jefferies believes investors may no longer be "overweight" on Indian equities if foreign fund re-allocations to China remain focus in Asia

** Outperformance of mid-caps CNXMIDCAP over Nifty 50 NIFTY has led to underperformance of foreign investor portfolios, heavy with IT and private sector bank stocks, it adds

** Mid-caps have risen 66% since the start of 2023, outperforming Nifty 50's 25% rise