JP Morgan’s 2026 year-end bull / base / bear case targets for the Nifty 50 stand at 30,000 / 27,000 / 20,500 levels, respectively.

JP Morgan has downgraded Indian equities to ‘neutral’ amid elevated valuations relative to emerging market (EM) peers, earnings risks, dilution concerns and limited exposure to ‘next-gen’ technology.

 

The downgrade comes a day after another foreign brokerage HSBC downgraded Indian equities to ‘underweight’ from ‘neutral’, citing rising risks to earnings from higher inflation, elevated energy prices, and a potential slowdown in domestic demand.

 

India’s reliance on imported energy, and the resulting risks to inflation and domestic demand, HSBC said in a note, has cast doubts on the durability of the ongoing earnings recovery.

 

That said, JP Morgan believes while India’s structural growth story remains strong, multiple idiosyncratic factors have made other EMs appear more attractive to on a risk-reward basis. 

 

JP Morgan’s 2026 year-end bull / base / bear case targets for the Nifty 50 stand at 30,000 / 27,000 / 20,500 levels, respectively.

Even though India’s valuation gap with the MSCI EM index has narrowed to 65 per cent (versus the 109 per cent peak premium), Indian equities, analysts at JP Morgan said, still trade at a significant premium to peers like Korea, Brazil, China, Mexico and South Africa that offer an inexpensive entry point for higher or similar forward earnings growth.

 

Corporate earnings, too, are in a spot of bother in the backdrop of the West Asia war, JP Morgan believes, and expects supply disruptions and elevated costs to persist for a few months, despite the ceasefire with normalization of energy flows likely to take another three to four months.

 

JP Morgan has revised down its FY27 earnings estimates by 2-10 per cent on a weighted-average basis over the last few weeks across sectors such as Consumer, Auto, Financials and oil marketing companies (OMCs).

 

“Challenges will manifest across sectors in various ways, including direct consumption impacts, margin compression, operational disruption and second-order effects. We cut our CY26/27 MSCI India earnings growth forecasts by 2 per cent/1 per cent, to 11 per cent/13 per cent,” wrote Rajiv Batra of JP Morgan in a recent note.

 

Another worry for them is India’s lack of exposure to artificial intelligence (AI)-related plays. India’s exposure to high-growth sectors like AI, datacenters, robotics and semiconductors is still pretty limited, their analysts said, especially compared to the US, Japan, Korea, China and Taiwan. 

“India is making progress, like startups in AI, big investments in datacenters and chip design centers for global firms, but its presence in these sectors is limited, especially in the large-cap index,” Batra said.

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