Even as worries mount over India’s slowing growth and tumbling currency, some strategists are recommending investors ramp up their exposure to the country’s equities, which are trading at the cheapest level in 20 months.
JPMorgan upgraded Indian stocks to overweight from neutral on Thursday, raising its year-end target for the benchmark Sensex index to 19,000 – a 12 percent upside from current levels.
The Sensex, which is currently trading at 13.3 times this year’s earnings, compared to highs of 21.8 times seen in October 2010, presents an attractive entry point, according to the bank.
Nicholas Ferres, Investment Director at Eastspring Investments, has added his first overweight position for the country’s stocks in five years this month. Ferres agrees that valuations look compelling and have largely priced in concerns over slower growth in the South Asian economy.
“Valuations have improved considerably over the past few years and have priced a lot of the secular deterioration in returns. The market is extremely oversold,” Ferres said in a note.
On top of attractive valuations, Vijay Kumar, Indian equity strategist at JP Morgan in Mumbai, says the bank’s shift to an overweight position was driven by falling oil prices, which help reduce the country’s current account deficit, and ease inflation pressures.
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