Nifty may see 6300 this yr; shun FMCG, buy banks: JP Morgan

The market is likely to make fresh highs of 6200-6300 by the year-end, but sustenance of the rally may be a concern, says Bharat Iyer, head of India equity research, JP Morgan. The market has rallied a good 2.5 percent after Fed refrained from tapering its USD 85 billion bond buying program, "but it is inevitable in the next 3-6 months," says Iyer.

Rally notwithstanding, India has its own set of problems which investors should be mindful of, he warns. Inflationary pressure, lower growth and current account deficit issues are likely to play truant in the second half of this fiscal, he cautions. 
Among specific stocks, Iyer is sure of FMCG disappointing. He says that the economic slowdown will impact sales leading to dismal earnings and adds that the FMCG stocks also have expensive valuations. Instead, Iyer, advises investors to look at beaten down financials and rate sensitives. Also read: How the recent slowdown has taken a toll on FMCG space Below is the edited transcript of Iyer’s interview to CNBC-TV18. Q: How are you tactically approaching this market now, is there more steam beyond this 6100 level or do you think this could be tops?
A: We have been having a neutral rating on India over the last month. We have to point that September and early October are very event-heavy months both from local and global perspective and that is the reason we had asked investors to be tactically neutral and stick as close to the benchmark as possible because there were just too many events in this period. We are sticking more or less to that stance at this point in time. Q: When consensus generally believes that this market is topping out the market does not oblige. Do you get a sense that purely because of the liquidity momentum that is currently underway this market could defy consensus and perhaps move to new levels towards the end of the year?
A: The high for this market in terms of Nifty I guess is around 6200-6300 and I wouldn’t be surprised to see us get there at some point. But sustenance and a move beyond, will require a lot of policy initiatives because two things to keep in mind- firstly, while the Federal Reserves (Fed) has deferred tapering, it is not that global monetary tightening is not going to happen at some point in time over the next three-six months. There are associated pressures that it will bring along. Secondly, we have our own set of macro economic problems. So, while the current account deficit (CAD) will start receding, we will have problems in the second half in the form of sustained lower growth and perhaps higher inflation and pressures in the fiscal deficit as well. So, investors should be mindful of these issues. Q: What are you advising people for those looking for tactical gains there is still something to be juiced out from the Indian markets and if yes where?
A: On a tactical basis, yes. Perhaps there is more upside to go and I wouldn’t be surprised to see an upside of another 3-5 percent and in currency terms perhaps a little more than that. The sector which has really beaten down was financials and rate sensitives. So that is where the juice is at this point in time. Q: What is the opportunity for investors at these levels also can they buy something because many of them have missed the bus?
A: Some of them have missed the bus but foreign investors are still overweight in India. Emerging market investors are on an average 200 bps overweight on India at this point in time. So, I don't think they have necessarily missed the bus. They kept faith as far as India is concerned and they have taken a lot of stress. So they should enjoy this all the more.
As far as markets are concerned, currently there is about 7-10 percent to be had on the table but a call for a structural bull market on the basis of just the Fed deferring tapering by three months that will be a bit premature.