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Downgrade India to underweight, from neutral.

Rajiv Batra – JPM

Downgrade Indian equities to Neutral

Structural story intact, but tactical headwinds warrant patience

Key drivers of the downgrade

(1) Valuation gap narrowing, but still stretched – India’s premium to MSCI EM has compressed to 65% (from a 109% peak), reflecting some re-rating, but peers like Korea, Brazil and China still offer cheaper entry points for similar or better forward growth.

(2) Earnings at risk – Energy supply disruptions are likely to pressure earnings through multiple channels. Our sector analysts have cut FY27 estimates by 2-10% across key sectors, and we lowered CY26E/27E MSCI India EPS growth by 2%/1%, to 11%/13%.

(3) Dilution caps upside – Large domestic inflows (~US$120bn since early 2025) have cushioned a record ~US$37bn FII exodus, but ~US$64bn in IPO/QIP issuance and promoter sales are diluting existing holders and capping upside, a stark contrast to the US, where buybacks persistently retire equity

(4) Limited next-gen tech exposure – India’s large-cap index has minimal AI, datacenter and semiconductor representation relative to the US, Korea, China and Taiwan.

(5) Monsoon risk – IMD pegs the 2026 monsoon at just 92% of LPA with El Niño developing, threatening rural incomes and food inflation.

Overall, see better opportunities elsewhere in EM until valuations de-rate further or earnings visibility improves.

TRADE SET UP

Software Sells Off Overnight !

GIFT Nifty trades higher, indicating a muted start for the Indian market

Finance Minister Sitharaman has warned banks about the need for extreme prudence, readiness, and coordination when it comes to new artificial intelligence technologies.

As tensions between the two nations continue to rise amid stalled peace negotiations, experts told CNBC-TV18 that the United States is unlikely to relax its naval blockade in the Strait of Hormuz unless Iran makes major concessions.

Some of the stocks to watch out for include Infosys, Tata Capital, LTM, Adani Energy Solutions, Cyient and more.

Check The Full List Here

On Friday, attention will turn to Infosys’s earnings, which have guided for FY27 revenue growth of 1.5% to 3.5% in constant currency terms, about in line with analyst estimates.

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