Why JPMorgan’s Sanjay Mookim Sees Indian Market Beating Global Peers Once Vaccine Arrives

That’s because except for a few Indian stocks that have done well, Indian markets have underperformed other peers in the last few months, Mookim, head of India research at JPMorgan, told BloombergQuint. There are chances of a beta move, which typically means higher volatility compared to benchmark but in this case also higher gains due to the relative underperformance, he said.

As of now, he said, Indian valuations and multiples are largely because of stimulus measures of the U.S. Federal Reserve and other central banks. If rates remain low in the world, that will backstop Indian indices, he said.

“One thing I have learnt as a strategist looking at India is that I can’t use bottom-up concerns or bottom-up valuations to say that India is overvalued.”

Mookim, however, said if growth is weak, there would be a narrow and a very limited basket of stocks to work with. A long-term investor, with a five to seven years’ horizon can look at companies with higher earnings growth, he said.

Very few of their clients have a one-year horizon, where earnings beat and momentum matters more, he said. Few companies will be able to show this earnings momentum because the economy is struggling, he said.

Key Themes

JPMorgan, according to Mookim, is negative on the discretionary space and overweight on private banks. While the pent-up demand in the discretionary segment after the lockdown may see surge for a month or two more, it is coming off, he said.

Mookim would not chase such themes as predicting them is difficult. He advises exiting the discretionary segment a better option when they surge due to any possible pent-up demand.

Aside of private banks, Mookim sees a potential for small upgrades in the information technology sector. The street is not factoring in the repeat of the first-quarter performance, he said. If IT companies can combat the recent uptick of the rupee, and if they deliver, then there might be money to be made in the IT stocks, he said. Mookim, however, would take exposure only to large caps stocks in banking and IT.

The risks, apart from geopolitics, are renewed lockdowns, according to Mookim, who considers these a real concern for the economy and the market. Taking into account all the risks, both local and global, Mookim said Indian indices could still be 10-12% higher after 12 months.