Indian equity benchmark index Nifty 50 could fall to the 20,500 mark in a bear case, warned global brokerage firm JPMorgan in its latest note. It has also downgraded the Indian equities market to ‘neutral’ from ‘overweight’ earlier. The brokerage has cited elevated valuations in the domestic market compared to emerging market peers

After HSBC, JPMorgan Downgrades Indian Equities As War Pressures India Inc

Indian equity benchmark index Nifty 50 could fall to the 20,500 mark in a bear case, warned global brokerage firm JPMorgan in its latest note.

It has also downgraded the Indian equities market to ‘neutral’ from ‘overweight’ earlier. The brokerage has cited elevated valuations in the domestic market compared to emerging market peers.

For the Nifty 50, JPMorgan has cut its bull case price target to 30,000 from 33,000 earlier. The base case target has been cut to 27,000 from 30,000 earlier, while the bear case price target for the benchmark index has been cut to 20,500 from 24,000 earlier.

Elevated valuations compared to other emerging markets, earnings risks, dilution concerns, and limited exposure to new-generation technologies have been termed as the key factors behind the target cut.

Indian large-cap stocks have limited exposure to emerging technologies like artificial intelligence, data centres, and chips compared to the US, South Korea, and Taiwan.

The premium offered by Indian equities to the MSCI EM has slipped to 65 percent from its peak of 109 percent, Rajiv Batra of JPMorgan said in his note.

The squeeze in premium reflects some re-rating; still, peers like Korea, Brazil, and China offer lower entry points for similar or better forward growth, Batra said.

The brokerage has upgraded tech and Taiwan to ‘overweight’, raising the target of the latter’s Taiex index.

“Overall, we see better opportunities elsewhere in Emerging Markets, until valuations de-rate further or earnings visibility improves,” JPMorgan said.

Batra said that domestic institutional investors have cushioned the blow of $37 billion FPI outflow, yet a $64 billion pipeline in the form of IPOs and QIPs is weakening existing holders and limiting the upside potential.

JPMorgan’s downgrade comes a day after HSBC downgraded Indian equities for the second time in a month, from ‘neutral’ to ‘underweight’.

It said that the war is a threat to the recovery in India Inc’s earnings.