The Hindu Business Line : JP Morgan sets Sensex target at 22500

Mumbai, Nov. 6 Global investment bank JP Morgan, which recently changed its outlook on the Indian equities market from “underweight” to “neutral” has a Sensex target of 22500 by December 2008.

Although this is 20 times earnings for fiscal year 2009, India still continues to be less expensive than other emerging markets, Mr Adrian Mowat, Chief Asian and Emerging Market Strategist for JP Morgan, said at a news conference on Tuesday.

China at 23 times forward earnings is more expensive, said Mr Mowat.

“We are bullish on emerging markets and bullish on the Indian equities market as well,” he said. The revision of their India outlook has to do with several factors, one of which is that other emerging markets are more expensive.

The other being that monetary and other policy changes in India have already played out in the market. “The sectors, which we expected to under perform have already done so,” he said. The willingness of the central bank to allow the rupee to strengthen is also attractive to investors, he said.

“We continue to like the infrastructure story; it is a global story. We are upbeat on engineering and construction services and also on steel,” he said.

“And the great thing about Indian steel names is that they have captive iron mines.”

The pressure on average revenue per user does not make telecom stocks look very attractive; there are concerns on the pharma front too, he said. Local consumption stocks have taken a beating as interest rate hikes have affected the two and four wheeler sector, while soft commodity prices continue to impact the FMCG sector.

The disproportionately high burden that rising oil prices will place on the oil marketing companies and on the government’s fiscal position are matters of concern, said Mr Rajeev Malik, Executive Director, Asia Economic Research, JP Morgan.

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