Primary market action draining liquidity from small and midcap spaces: JPMorgan's Rajiv Batra

JPMorgan estimates an earnings growth of 12-15% in FY25 for Indian equities, with an anticipated comeback from Q3FY25 onwards.

JPMorgan's Rajiv Batra believes the ongoing IPO and primary market issuances are draining out excess liquidity that has been sitting in the small and midcap spaces, and will lead to cooloff in these pockets.

Talking to CNBC-TV18, Batra, JPMorgan's Head of India, ASEAN, APAC, Ex-Japan/China Equity Strategy said that the size of market corrections are reducing in size and duration, especially after Covid-19. In light of that, he said such corrections will be a good opportunity for first-time investors to deploy money, or for foreign investors who have missed the rally to find an entry point to the small and midcap equities space. For retail investors, Rajiv Batra's advice is not to chase the rebounds.

Rajiv Batra said India has rallied nearly 660% in last two decades, while US has gained only 440%, and this outperformance has come largely due to India's earnings potential. He said that while June quarter results were lacklustre and even the September quarter numbers may be underwhelming, earnings growth may rebound from third quarter onwards.

Batra said Centre may spend on capex will show some support to earnings growth, and revival in rural economy too can lend support here. JPMorgan estimates an earnings growth of 12-15% in FY25 for Indian equities, with an anticipated comeback from Q3FY25 onwards.

His view is that the worst of the earnings downside may have been factored after the June quarter results, and the India Inc's earnings growth may start showing an uptrend.
In the midcap space, 52 out of 89 stocks saw earnings downgrade in Q1FY25, while in the smallcap space, 40 out of 79 stocks have seen earnings downgrade during the June quarter.

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