JPMorgan Strategist on Right Time to Invest in Mid- and Small-Cap Companies

According to Rajiv Batra, head of India, ASEAN, APAC, excluding Japanese and Chinese equity strategies, falling liquidity and increased fundraising activities in the market could impact mid- and small-cap stocks.

Speaking to CNBC-TV18 on the sidelines of the JP Morgan India Investor Summit, Batra noted that the increase in initial public offerings (IPOs) and additional equity issuances is likely to result in a large amount of funds being withdrawn from the market.

The biggest corrections will most likely be felt by small and mid-sized companies, given their current high valuations.

Still, Batra believes an 8-10% drop could provide a buying opportunity, especially for foreign and first-time investors who missed out on India’s earlier rally.

He advises current investors to avoid riding the current rally and instead consider buying on dips, especially high-quality stocks, as such a pullback could provide a more attractive entry point.

He said India’s strong performance compared to the US was mainly driven by corporate earnings. However, FY25 has started off weakly with disappointing earnings in the first quarter and the second quarter is also likely to remain sluggish.

Some improvement in demand in the rural economy is expected, supported by increased government spending.

“But the problem also comes from the municipal spending side where we see demand for quadricycles coming down, hotel occupancy rates coming down, white-collar employment coming down. So we are in a late cycle as far as our QMI is concerned and that usually happens once in two to three years. So we expect that this phase could continue for the next three months for earnings,” he added.

Read also: JPMorgan Raises Indus Towers Ratings: Here Are 3 Reasons It Raised Target Price by Over 45%

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