Indian Economy: Leading international brokerage JP Morgan has raised its recommendation for India to “overweight,” reiterating the nation’s increasing attraction to investors. The brokerage has made a significant move by adding three well-known stocks to its Emerging Markets (EM) Model portfolio: Sun Pharmaceutical Industries Ltd., Bank of Baroda, and Hindustan Unilever.
JP Morgan’s ‘Overweight’ Rating Aligns with Other Leading Brokerages
With this promotion, JP Morgan joins the ranks of other major international brokerages that have also elevated India to a “overweight” classification, including Morgan Stanley, CLSA, and Nomura. This choice is supported by a number of variables, such as the favourable seasonality associated with general elections, the strong nominal GDP growth of emerging nations, and the anticipated decline in risk premiums associated with the expansion of the domestic bond market. The upgrade by JP Morgan is based on both structural and cyclical factors. It takes use of short-term correlations and dips as chances in the cyclical domain.
India’s Strong Structural Case
Strong nominal GDP growth, driven by demographic trends and infrastructure investment demands, competitive risk-adjusted yields relative to developed markets, and a thriving domestic bond market all contribute to India’s strong structural argument. The firm does concede, though, that as US long rates climb and the dollar’s influence continues to affect growth and rates, developing market equities may encounter difficulties. According to JP Morgan, a sustained buy for emerging market stocks would not emerge until the US has finished its cycle, which might include rate reduction and a GDP contraction.
JP Morgan Adds Key Indian Stocks to EM Model Portfolio
JP Morgan’s belief in India’s economic potential and its dedication to grabbing hold of emerging market prospects are further evidenced by the addition of Sun Pharmaceutical Industries Ltd., Bank of Baroda, and Hindustan Unilever to its EM Model portfolio. JP Morgan’s action comes after several other significant brokerages have endorsed India’s increasing significance.
India’s ‘Overweight’ Ratings Gain Traction as Nomura
Nomura also upgraded India to “overweight” in September, citing a strong top-down narrative and the potential benefits from the China+1 trend. Morgan Stanley had previously upgraded India to “overweight” due to improved economic and earnings growth, and CLSA had increased its allocation to India by 20%. Furthermore, because of premium oil prices, uncertainty, a strong dollar, and equities market de-rating, JP Morgan upgraded Saudi Arabia to “overweight.”
South Korea Shifted to ‘Neutral’ Amid Profit-Taking and Economic Challenges
On the other hand, because of profit-taking, rising US interest rates, declining demand, and less accommodating monetary policy, it has demoted South Korea to “neutral.” With respect to Saudi Arabia and India, JP Morgan intends to deploy its risk budget to overweight China due to the country’s appealing economic pace, low investor positioning, and advantageous values.