Overweight on India going into 2024, says James Sullivan of JPMorgan
JPMorgan's house-view, as articulated by Sullivan, diverges from the market consensus. He suggested that the likelihood of rate cuts is more second-half biased, with the potential for this trend to extend into the following year.
JPMorgan has an overweight position on India, said James Sullivan, MD-Asia Pacific Eq Research at JPMorgan. In an exclusive interview with CNBC-TV18, Sullivan discussed the rationale behind the firm's overweight position on India, highlighting key factors that contribute to this positive outlook.
Sullivan emphasised India's robust growth as a significant driver behind JPMorgan's favourable stance. He pointed out that the country currently boasts the highest corporate return on equity (RoE) in Asia, signalling not only substantial growth but also the exceptional quality and high returns. These factors are anticipated to persist in the foreseeable future, adding to the attractiveness of the Indian market for investors.
Despite the positive outlook, Sullivan acknowledged potential challenges on the horizon. With the global economy bracing for a slowdown in the second half of the year, concerns loom over a corresponding dip in earnings. Sullivan noted that changing expectations regarding potential rate cuts are likely, with the market having already priced in a substantial 100 basis points (bps) of rate cuts in the first half of 2024.
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JPMorgan's house view, as articulated by Sullivan, diverges from the market consensus. He suggested that the likelihood of rate cuts is more second-half biased, with the potential for this trend to extend into the following year. This nuanced perspective implies a strong start for the market in the initial months of 2024, possibly benefiting from idiosyncratic factors such as election timing in various Asian markets.
“The challenge– as we get into the second half – is we do see an economic slowdown globally, we do see the downside to earnings. And you are likely to see changing expectations in terms of the potential for rate cuts. The market has priced in 100 basis points (bps) of rate cuts in the first half of 2024. JPMorgan’s house-view is that it is much more likely to be in second half biased with a potential to push into the following year,” he stated.
However, Sullivan tempered this optimism by forecasting a more challenging economic landscape in the latter part of the year. He underscored the complexities that could arise, signalling a potentially difficult picture for investors in the second half of 2024.
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