J.P.Morgan downgraded Indian equities to "underweight" and cut its full-year forecast for the MSCI Emerging Markets index, as geopolitical tensions fuel inflation worries, roiling global financial markets.
The brokerage, which previously had a "neutral" rating on Indian equities, cited a slew of factors, including a weaker rupee and its impact on growth, a spike in prices of commodities such as oil, potential portfolio outflows and the domestic monetary tightening cycle.
Commodity prices have skyrocketed after Russia was slapped with Western sanctions for its invasion of Ukraine, worsening inflationary pressures globally and prompting governments and central banks to reassess their monetary policies.
India's government trimmed its growth estimate for the 2021/22 fiscal year to 8.9% from 9.2%.
J.P.Morgan now expects the MSCI emerging markets (EM) index to hit 1,300 by the year-end from 1,500 estimated previously. The index closed at 1,081 on Wednesday.
The brokerage expects earnings to be lower this year, with commodity prices surging and Russia being excluded from MSCI EM index.
FTSE Russell and MSCI had earlier this month said they would remove Russian equities from all their indexes.
"Our view remains that EM equities should outperform (post target revision) driven by upward bias to EPS consensus estimates and downward bias to equity risk premium," J.P.Morgan economists said in a note dated Wednesday.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU