JP Morgan, a leading global brokerage firm, has
upgraded Bharat to an “overweight” rating, reaffirming the country’s growing
appeal to investors.
In a key move, the brokerage has included three
prominent stocks, Sun Pharmaceutical Industries Ltd, Bank of Baroda, and
Hindustan Unilever, in its Emerging Markets (EM) Model portfolio.
This upgrade aligns JP Morgan with other prominent
global brokerages like Morgan Stanley, CLSA, and Nomura, who have also pushed Bharat
to an “overweight” status.
Many factors underpin this decision, including the
positive seasonality linked to general elections, the robust growth in emerging
markets’ nominal GDP, and the expansion of the domestic bond market, expected
to reduce risk premiums.
JP Morgan’s upgrade is founded on both cyclical and
structural considerations. On the cyclical side, it leverages near-term
correlations and dips as opportunities.
Structurally, Bharat’s compelling case is bolstered by
strong nominal GDP growth, driven by demographic trends and infrastructure
investment needs, competitive risk-adjusted returns compared to developed
markets, and a burgeoning domestic bond market.
However, the brokerage acknowledges that emerging
market equities may face challenges as US long rates rise and the dollar’s
influence impacts growth and rates.
JP Morgan suggests that a sustainable bid for emerging
market equities may only materialize once US completes its cycle, which could
involve a GDP recession and rate cuts.
Incorporating Sun Pharmaceutical Industries Ltd, Bank
of Baroda, and Hindustan Unilever into its EM Model portfolio further reflects
JP Morgan’s confidence in Bharat’s growth potential and its commitment to
seizing emerging market opportunities.
This move by JP Morgan follows other major brokerages’
endorsements of Bharat’s growing prominence.
Morgan Stanley previously upgraded Bharat to “overweight”
due to improved economic and earnings growth, while CLSA boosted its Bharat portfolio
allocation by 20 per cent, and Nomura also upgraded Bharat to “overweight” in
September, citing a strong top-down narrative and the potential benefits from
the China+1 trend.
Additionally, JP Morgan has upgraded Saudi Arabia to “overweight”
due to factors such as premium oil prices, uncertainty, a strong dollar, and
equity market de-rating.
Conversely, it has downgraded South Korea to “neutral”
due to profit-taking, higher US rates, slowing demand, and less accommodative
monetary policy.
JP Morgan has plans to allocate its risk budget to
overweight China, alongside Saudi Arabia and Bharat, given China’s attractive
growth momentum, low investor positioning, and favourable valuations.
ANI
