JP Morgan upgrades India to ‘overweight’; advises buying on dips

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general elections. It further noted that India offers the strongest emerging market (EM) nominal GDP compounding (demographic trends, infrastructure investment needs) and has competitive risk-adjusted returns to developed market (DM) equities. A deeper domestic bond market should support lower risk premia, it added.

The brokerage has also added Sun Pharma, Bank of Baroda, and Hindustan Unilever to its EM model portfolio. After a strong bull run earlier this year, the Indian market lost over 3 percent in October so far. This decline has been on the back of the Israel-Palestine conflict, rising bond yields, a strong dollar, a surge in crude oil prices and continuous outflows by foreign investors.

JP Morgan believes that EM equities face challenges as US long rates rise and the dollar impacts growth and rates. A sustainable bid for EM equities may only emerge once the US completes its cycle with a GDP recession and rate cuts, it stated. Before JP Morgan, other global brokerages, Morgan Stanley and Nomura, also upgraded their India ratings to ‘overweight’ whereas CLSA increased its India portfolio allocation by 20 percent.

Morgan Stanley upgraded India's rating citing that the relative economic and earnings growth is improving and the macro-stability setup looks sufficient to withstand the higher real rate environment. “India remains standout overweight. We increase our overweight stance on Indian equities and as our most-preferred emerging market," it said.