JPMorgan India said that Indian equity market outperformed emerging markets last year handsomely by doing virtually nothing. The index delivered 4.8 percent returns in rupee terms that was negative in dollars, yet it outperformed because North Asia was doing poorly.
In an interview with CNBC-TV18, Sanjay Mookim, Strategists and Head of India Equity Research at JP Morgan India said that India to still outperform emerging market peers despite high valuations.
He said, “India is now on track with S&P in dollar terms, but we still retain significant outperformance over the EM index. So, it is possible that India treads water for a little bit longer.”
Mookim highlighted that the Chinese economic data is expected to remain strong over the next few months. However, he also noted that analyst forecasts for earnings are still quite high.
When it comes to sectors, Mookim believes that financials and banks are still the only areas that make sense on a discounted cash flow (DCF) basis. He also commented on the high multiples for both the Indian market and its corporates.
He said, “Financials and banks remain the only sector in India, which makes sense on a DCF. So, if you were to model the top 200-300 stocks, it’s largely the financials which makes sense on a value screen.”
Given these factors, Mookim recommends that investors move their portfolios into large, liquid names and exercise caution when it comes to smaller names in India. He also doesn’t anticipate much higher rate increases and believes that we are at the peak of a tightening cycle.
Mookim also noted that it appears that rate cuts in the US are being priced into the market. As such, he urged investors to remain vigilant and carefully consider their investment strategies considering these developments.
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