BENGALURU: J.P. Morgan downgraded Indian equities to “neutral” from “overweight,” citing elevated valuations compared to emerging market peers and pressure on earnings from energy supply shocks linked to the Iran war, a day after HSBC lowered its rating.
Surging crude prices could stoke inflation and growth risks for the country, squeeze consumption and weigh on near-term corporate margins, with a weakening rupee adding to the pressure, the brokerage said in a note on Friday.
Earlier this month, J.P.Morgan cut FY2027 earnings estimates by 2 percent-10 percent across domestic sectors such as energy, consumer, auto and financials. It also reduced MSCI India earnings growth forecasts for 2026 and 2027 by 2 percentage points and 1 percentage point, respectively, to 11 percent and 13 percent.
Additionally, the brokerage lowered its year-end target for the benchmark Nifty 50 by 10 percent to 27,000. The Nifty and Sensex have fallen 8.5 percent and 10 percent this year and are currently trading about 9.3 percent and 11 percent lower than record highs hit in early 2026 and late 2025, respectively.
“Despite the recent drop, India still trades at a significant premium to peers like Korea, Brazil, China, Mexico and South Africa, which all offer an inexpensive entry point for higher or similar forward earnings growth,” said J.P.Morgan.
India also lacks meaningful exposure to high-growth themes such as AI, data centers, robotics, and semiconductors, which could limit earnings growth compared to emerging market peers with a stronger presence in these segments, the brokerage added.
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