(Updates with details)
MUMBAI, June 21 J.P.Morgan upgraded Indian
equities to "overweight" from "neutral", despite acknowledging
the risk factors facing the economy, encouraged by what it
called a number of more positive factors including historic
The bank said its year-end target for the BSE index
was at 19,000 points, a nearly 12 percent upside from current
It expects the broader 50-share NSE index to trade
in a 4,800-5,200 range in the near-term.
Slowing policy reforms, however, remain a hindrance to
economic growth and would be key to a recovery, J.P.Morgan said.
"If policy actions manage to revive corporate and consumer
confidence, growth may accelerate into the second half of the
fiscal year," the bank said in a note Thursday.
Despite calling the environment "clearly poor," because of
risks including slowing economic growth, J.P.Morgan argued
Indian valuations are trading at 12 times forward earnings, or
one standard deviation below the 10-year historic average.
The Reserve Bank of India's 50 basis points cut in interest
rates in April and its combined cut of 75 basis points in the
cash reserve ratio so far this year should start impacting the
economy late in the year, it said.
A slumping rupee would boost trade, while lower oil prices
would ease pressures on India's current account and fiscal
deficits, J.P.Morgan added.
The investment bank said it remains "overweight" on private
banks, citing "strong" growth in revenues on the back of loan
Its other "overweight" sectors are IT services and health
care as part of a strategy of focusing on sectors that stand to
benefit from rupee depreciation.
The rupee slumped to a life low of 56.55 to a dollar on
Thursday, as less aggressive monetary easing from the U.S.
Federal Reserve and weak data from China and Germany fanned risk
However, J.P.Morgan is "underweight" on consumer
discretionary goods given a "demanding" base effect and
"adverse" impact from the government's push towards fiscal
The bank is also "underweight" on energy and materials.
(Reporting By Rafael Nam; Editing by Subhadip Sircar)