JPMorgan-India Equity Strategy Small and Mid Caps - Froth or Not-107108752

JPMORGANGlobalMarketsStrategy19March2024IndiaEquityStrategySmallandMidCaps-FrothorNot?NiftyMidcap100andNiftySmallcap100loggedtheirlastintradayall-timehighsEquityMacroResearchof49,780and16,691,respectively,on8Febandthenlost9%and16%totheirlowson14MardrivenbyregulatoryvigilanceandtheseasonalMarchphenomenonRajivBatraAC(wheninvestorstendtolightentheirportfoliofortaxharvestingandforadvancetaxpaymentby15Mar).WethinktheSMIDspacecouldremainvolatileinthe(65)6882-8151comingweeks(Indiamarketvolatilityinelectionyearstendstorisefromend-rajiv.j.batra@jpmorgan.comMarch),withmarginfundingandinvestorflowsaddingtorisks.JudgingbyJ.P.MorganSecuritiesSingaporePrivateLimitedpreviouscorrectionsintheSMIDspace,therecouldbe5-10%furtherdownsidefromhere.However,SEBI’sstresstestonSMIDfundshighlightsampleliquidityMixoDasthatshouldhelplimittheriskofanextendedorsharpsell-off.Beyondnear-termvolatility,webelieveSMIDsofferhigherexposuretofavorablethemeslike(852)2800-0511manufacturing,infrastructuredevelopment,EV,digitaltransformation,greenmixo.das@jpmorgan.comenergyandsustainability;andhavehistoricallyofferedhigherSharperatiosandJ.P.MorganSecurities(AsiaPacific)Limited/J.P.higheralphaopportunities.ThesehigherreturnsaredrivenbysuperiorearningsMorganBroking(HongKong)LimitedgrowthCAGRsformidcaps/smallcaps,estimatedtobe+60%/+24%respectivelyforCY20...