JPMorgan India Investor Summit: Markets To Face Pressure Till Rates Reduce, Says Sanjay Mookim
Stocks that promise higher growth will continue to remain under pressure until the U.S. Fed takes a dovish stance, he said.
Equity markets are likely to remain under pressure as central banks around the globe continue to withdraw liquidity, according to JPMorgan's Sanjay Mookim.
"We continue to see liquidity withdrawal by central banks happening for the next several months, which should put a lid on equity upside from here on," Mookim, India strategist and head of equity research at JPMorgan India, told BQ Prime on the sidelines of the JPMorgan India Investor Summit.
Stocks that promise higher growth will continue to remain under pressure until the U.S. Fed takes a dovish stance, he said. The growth basket in India includes internet stocks, consumer discretionary, non-banking financial companies, as well as the midcap space, he said.
"As the cost of capital inches higher, growth as a style comes under pressure." Growth stocks around the world will perform much better as the Fed commentary turns dovish, according to Mookim.
The Fed is expected to turn dovish in the long run, as it will be fiscally unsustainable for the U.S. government to pay such higher rates. However, since equity markets expect higher rates to be temporary, a lack of quantitative tapering may cause markets to panic, he said.
The need for liquidity is driving investors towards large-cap names, despite the subdued performance of the large-cap space, he said. Among large caps, banks are the "one space that makes sense on a valuation versus growth tradeoff," according to Mookim.
Banks are trading at decent valuations and have, at the same time, delivered earnings upgrades. The sector may, however, not hold up as markets fall, as they face lower loan growth impacted by tighter deposits, he said.
The JPMorgan India Investor Summit was attended by 800-900 people, including 69 listed companies, 12 unlisted companies, and over 400 investors and clients.
