JPMorgan upgrades India to ‘overweight’ on higher government spend

JPMorgan upgrades India to ‘overweight’ on higher government spend

JPMorgan Chase & Co has raised its bet on Indian equities, upgrading its stance to “overweight”, since there will be higher government spending in the run-up to the 2024 Lok Sabha elections to boost consumption and market sentiment.

“Nifty has delivered 13% returns in the six months leading up to a general election since 1991,” said JP Morgan strategists in a note. Calculations show a median return of 13% since 1991. Only in two instances — 1991 and 1998 — has the Nifty returned losses.

The views of global brokerages are divided. JPMorgan follows global peers Morgan Stanley, CLSA, and Nomura in being overweight.

On the other hand, Goldman Sachs Group had said earlier this month that global challenges and high valuations warrant a cautious approach ahead of the elections.FPIs have been in selling mode, having pulled out $3.6 billion from India so far since the beginning of September, after six months of net buying to the tune of $21 billion.

Sectorally, JPMorgan is overweight on financials, auto, pharma, consumer staples and real estate. However, it is underweight on materials, hospitals, and energy (ex-RIL).

According to Bloomberg, JPMorgan had upgraded India stocks to neutral from underweight in June this year.

Since then, the Nifty50 has risen 1.6% against a 9.7% plunge in the MSCI Asia Pacific index. Domestic markets, it said, have beaten EM gauges this year, even as the outperformance has come under pressure.

This is due to the spike in US bond yields, coupled with the tensions in West Asia, which have hurt appetite for riskier assets.

The report states several reasons to be positive on India over the long term, such as rising wealth, increasing urbanisation, strong infra push by the government and an impetus to manufacturing so as to be seen as an alternative to China, the strategists wrote.

The foreign brokerage has included Sun Pharmaceutical Industries, Bank of Baroda and Hindustan Unilever to its Emerging Market Model portfolio.

Among others, JP Morgan upgraded Saudi Arabia to overweight, thanks to oil prices trading at a premium.

At the same time, it downgraded South Korea to neutral on account of profit-taking.