Nifty could climb to 27,000 by January, says JPMorgan
What's the story
JPMorgan's Rajiv Batra has predicted that the Nifty index could reach around 27,000 by the end of January. The prediction was made during the JPMorgan India conference in Mumbai. Batra is the Head of Asia and co-Head of Global Emerging Markets Equity Strategy at JPMorgan. He said, "We anticipate there will be an upsurge into the year-end."
Market dynamics
Investors to remain cautious until late October or early November
Despite the bullish outlook for year-end, Batra expects investors to remain cautious until late October or early November.
He attributed this caution to three main factors: potential rate hikes by developed-market central banks, rising Japanese bond yields, and lower trading volumes ahead of the US midterm elections.
Emerging markets also witnessed a small outflow last week, ending a 10-week streak of inflows.
Market projections
Chances of Nifty hitting bear case of 20,500 have reduced
Batra said the chances of Nifty falling to JPMorgan's bear case of 20,500 have reduced.
He noted that bond markets are already factoring in another 70 basis points of rate hikes from the US Federal Reserve and Bank of Japan (BoJ) by March.
Oil prices also started declining over the weekend, further supporting this prediction.
Investment insights
Corporate earnings to attract investors
Batra expects corporate earnings for the July-September quarter to entice investors.
He said, "If there is a weakness in end-October, early-November, that becomes a good opportunity for people who are on sideline to come back and join the bullish bandwagon."
This comes after global earnings were strong last quarter but markets fell as valuations adjusted to changes in interest rate policy.
Market trends
Focus on top 500 listed companies
Batra advised investors to focus on the top 500 listed companies, not just the Nifty 50 or BSE indices.
He noted that over 300 stocks now trade at least $10 million a day on average, attracting investors beyond large caps.
Midcap and smallcap companies growing at 20% to 40% are outperforming their peers, according to Batra's observations.
Ownership shifts
Foreign ownership trends in largecap, midcap, and smallcap stocks
Batra observed a decline in foreign ownership of largecap stocks from 24% to 16%, while midcap ownership rose from 9% to 12%.
Smallcap ownership has remained steady at around 10% for a decade.
He noted that largecap earnings are growing at a trailing basis of 8-9%, compared to North Asian peers' growth rate of up to 85%.
Sector outlook
JPMorgan's sectoral preferences and banking forecast
Batra revealed JPMorgan's preference for real asset sectors such as technology hardware, materials, industrials, hospitals, and financials.
He named grid capital spending, cables and wires, and transformers among Indian investment ideas.
Batra also expects money to flow back into private banks after the Fed's first rate hike on September 16.
He predicts RBI will raise rates by 50-75 basis points in favor of banks with large deposit bases.