JP Morgan upgrades India to overweight in run-up to polls
JP Morgan upgraded its rating on India to 'overweight' from 'neutral' partly on the grounds that the market historically has mostly risen in the run-up to the national elections. The brokerage said India's strong economic outlook and prospects of a deeper bond market are also factors to be positive on the country's equities in the longer term.
Since 1991, the Nifty has risen on six out of the eight six-month periods before the elections, said JP Morgan.
The index has returned an average of 13% in this period in the past 32 years, it said. The next general election is scheduled to be held in May next year.
«As the General Election 2024 draws nearer, the government may consider fresh initiatives like supporting rural India/urban poor and additional expenditures aimed at boosting public sentiment,» said JP Morgan in a note to clients.
«These initiatives are anticipated to be unveiled across distinct time frames, with certain unveilings slated for the festive season and others earmarked for the Interim Budget.»
The brokerage has added Sun Pharma, Bank of Baroda, and Hindustan Unilever to its Emerging Markets Model Portfolio.
JP Morgan said the Nifty on a historical basis has delivered 'unparalleled' risk-adjusted returns. The ratio of annualised returns over volatility on the Nifty is at 0.57 since inception as against 0.54 of the Nasdaq 100 and 0.46 of the S&P 500.
«These numbers paint a clear picture: historically, Nifty has offered robust returns, and it does so with reduced volatility,» said the brokerage.
JP Morgan said the deeper bond market following India's inclusion into the JP Morgan Government Bond Index-Emerging Markets (GBI-EM) will lower risk premia further and boost financing capacity.
