Mumbai, Jun 21 (PTI) After a rash of downgrades and dismal growth forecasts, there is some good news with American investment bank JP Morgan today upgrading domestic equities to "overweight" from "neutral", primarily due to the massive fall in the crude prices as well as the rupee. Citing a number of factors including historic valuations, expectations for monetary stimulus, lower oil prices, and a weak rupee, the investment bank said in a report that "it is overweight on private banks, IT services, and health care, but is underweight on consumer discretionary, energy and materials". In the report, its emerging market equity strategist Adrian Mowat said, "lower oil price helps the current account deficit economies of India and Turkey. Therefore, we are upgrading these countries to overweight." Easier monetary policy plus CPI greater than PPI are consistent with an upgrade cycle, the report said, adding the monetary policy has a delayed effect so the cycle may be late 2012 and markets discounting in Q3 of 2012. Citing reasons for its upgrade, the report said, the market appears to have priced in most of the negatives already. MSCI India forward P/E is 12 times the
Sensex value now, which is one standard deviation below its 10-year average. However, the I-bank has not put a target for the Sensex. Noting that economic growth was the slowest since 2003 in FY12, when the GDP slipped to a 6.5 percent, and the April factory output was flat after being negative in March, the report said with the falling crude, (which was trading today at USD 91 a barrel,) will offset a lot of issues facing the country. The report pegged the current account deficit at 4.6 percent of GDP for FY12, which was just 2.7 percent in FY11. It, however, noted that confidence in government policy and its ability to implement reform is low and that the current environment is clearly poor. MORE
