From banks' strong earnings growth to long-term investment trends —JPMorgan on India's economy

Banking sector in India presents an attractive investment opportunity as they are one of the few sectors in the market where valuations remain acceptable, say experts from JPMorgan, a leading global financial services firm.

Sharing their views on various aspects of India's financial landscape and growth drivers in a recent discussion on CNBC-TV18, three experts from JPMorgan spoke about the potential of India's banking sector, bond market and the long-term investment trends.

Sajjid Chinoy, Chief India Economist at JPMorgan, highlighted bond market heterogeneity, emphasising a critical issue concerning heterogeneity within the bond market in particular.

He said, “The larger issue is not so much about the quantum of money. It is to just have some more heterogeneity in the investor space in the bond market. The more heterogeneity you have, the better price discovery will have in both directions.”

Chinoy also highlighted the influence of bond and debt money on indices, noting that India's 10 percent weight can bring stability in good times and cushion against shocks during adverse times. He views this passive money as a source of long-term investment that allows India to tap into the global pool of savings to finance its current account deficit.

Sanjay Mookim, Head of India Equity Research at JPMorgan, expressed his views on market sentiment, emphasising the link between India's equities and global equity sentiment. Mookim believes that while India's long-term growth potential remains intact, short-term market movements often align with global sentiment. He referred to the current market sentiment as "dovish."

Mookim also highlighted the banking sector's strength, pointing out its robust earnings growth. He believes that banks present an attractive investment opportunity, as they are one of the few sectors in the market where valuations remain acceptable.

He said, “Banks anyway, look great to us, because earnings growth is strong, it's probably the only sector in the market where valuations are acceptable so the core argument is still very strong for banks.”

Kaustubh Kulkarni, Sr Country Officer-India at JPMorgan, emphasises investor representation and the 'China+1' theme.

"The 'China Plus One' narrative is actually interesting. Existing Indian businesses that were already in the export area, including, let's say pharmaceuticals, chemicals, agrochemicals, and engineering goods, all those are seeing substantial growth and traction. So a reasonable amount of investments are actually being done.  And they are benefiting because of customers looking to shift away from their existing sources and supply chains in China,” Kulkarni said.

He added; “ But the larger question is, whether the existing large capacity, which is operating in China and Taiwan also looks for alternatives outside. As far as India is concerned, it is still relatively early.”

Regarding investor representation, Kulkarni noted that JPMorgan India Investor Summit 2023 has drawn the participation of nearly 400 investors, marking a significant increase of approximately 50 percent compared to the previous year.

Of these investors, nearly 300 are focused on equity investments, while around 100 are engaged in debt investments. On the debt side, we have engaged with approximately 75 companies, collectively representing an impressive market capitalisation of approximately 1.2 trillion in the Indian market.