In a significant update to its India strategy, J.P. Morgan has shifted to a more constructive stance on Indian equities as of February 2026. The firm notes that while India has traditionally traded at a “premium” compared to other emerging markets, the valuation gap has narrowed below its long-term average, making the market increasingly attractive for entry.
This update follows a period of “healthy rotation” where global investors pivoted away from high-priced tech stocks (following the “SaaSpocalypse” sell-off) toward markets with resilient domestic fundamentals.
1. The “Narrowing Gap” Rationale
J.P. Morgan analysts, led by Sanjay Mookim (Head of India Equity Research), highlight that the recent price corrections and steady earnings have made India’s “demanding” valuations more justifiable.
- Premium Sustainability: The firm believes India’s premium to emerging market (EM) peers is now sustainable because the earnings downgrade cycle has abated.
- Relative Attractiveness: With other Asian markets and the U.S. seeing high volatility, India’s steady low double-digit earnings growth (projected at 13% for 2026) offers a “stability hedge” for global portfolios.
- Nifty Target: J.P. Morgan maintains a base-case target of 30,000 for the Nifty 50 by the end of 2026, driven by this re-rating and resilient domestic capital flows.
2. Strategic Sector Preferences
Rather than a “buy everything” approach, J.P. Morgan is advocating for a selective strategy focused on domestic consumption and high-quality “out-of-favor” stocks.
| Sector | J.P. Morgan Stance | Reasoning |
| Consumer Discretionary | Overweight | Improving demand trends and strong festive season earnings. |
| Financials | Positive | Clean balance sheets and a “more room to run” outlook. |
| Capital Goods / Infra | Underweight / Cautious | Limited government spending capacity and fiscal constraints. |
| IT Services | Neutral / Selective | Guilt by association with the “SaaSpocalypse”; seeking “irrefutable AI tailwinds.” |
3. Key Tailwinds for 2026
The firm identifies three major catalysts that could drive Indian markets toward its 30,000 Nifty target:
- The “China-Plus-One” Maturity: India is no longer just a “potential” alternative; J.P. Morgan sees it emerging as a genuine manufacturing hub in electronics and specialty materials, supporting export growth.
- Budget Realism: Analysts described the Union Budget 2026-27 as “realistic,” noting that its focus on cyclical growth and semiconductor missions (India Semiconductor Mission 2.0) provides a clear structural roadmap.
- Domestic Flow Resilience: Even as Foreign Institutional Investors (FIIs) remained volatile, the steady flow of domestic SIPs (Systematic Investment Plans) has provided a floor for valuations.
4. Identified Risks: The “Supply Factor”
Despite the better valuations, J.P. Morgan warns that several headwinds could “cap” the near-term upside:
- Equity Over-Supply: A heavy pipeline of IPOs, promoter sales, and block deals could soak up liquidity and prevent a sharp upward breakout.
- Currency Weakness: After adjusting for rupee depreciation, dollar-adjusted returns for international investors may be limited to mid-to-high single digits.
- Global Fragmentation: Rising trade tensions and the “fractured world order” remain the biggest external threats to India’s export-heavy sectors.
Conclusion: A “Goldilocks” Entry Point?
For J.P. Morgan, India in 2026 represents an economy “gaining altitude.” The firm’s shift suggests that while the era of “cheap” Indian stocks is gone, the current “fair” valuations combined with structural reforms make it one of the most attractive emerging markets for the next 24 months.
