NEW DELHI: Foreign brokerage JP Morgan downgraded India to ‘underweight’ from ‘neutral’, saying GDP growth may disappoint, adding to the downside risks to EPS estimates.

High inflation is hurting both households and businesses, the brokerage said as it noted that the MSCI India is trading at a 98 per cent premium to the broader emerging market index.

The brokerage said it retains its positive view on India’s defensive pocket as a shelter for volatile times. The brokerage has removed Tata Power, DLF and ICICI Bank from its EM model portfolio.

Domestic monetary tightening cycle is key to watch, it said.

JPMorgan’s rating cut followed a similar rating cut by brokerage Credit Suisse (CS) earlier this month, as the latter felt India is the most vulnerable to oil price hikes in Asia.
Credit Suisse recently said it will look for opportunities to re-enter the Indian market, but would tactically cut its India position to ‘underweight’ from ‘overweight’. Higher oil prices hurt the current account, add to inflationary pressures and increase sensitivity to Fed rate hikes, it had said adding that rich valuations magnify short-term risks.

In fact, on Wednesday, another foreign brokerage BofA Securities said Nifty50 could end the year 2022 at 17,000 if there are no further geopolitical escalation issues. The target implies limited gains for the index.


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