Asia Markets

India stocks 'quite fully priced' — but watch for the country's vaccination push, says JPMorgan

Key Points
  • JPMorgan Asset Management's Alexander Treves said investors should watch India's plan to vaccinate its population for the near-term outlook for stocks.
  • India's BSE Sensex on Thursday briefly soared to a record high, crossing the 50,000 level for the first-time ever.
  • "Indian equities are already quite fully priced," Treves told CNBC.
A pedestrian speaks on a mobile phone as he looks at share prices on a digital broadcast outside the Bombay Stock Exchange (BSE) in Mumbai on November 10, 2020.
PUNIT PARANJPE | AFP via Getty Images

SINGAPORE — A major Indian stock market hit a record high last week — and analysts say the share valuations are looking fair at the moment, though developments on the vaccine front could affect the near-term outlook.

India's BSE Sensex on Thursday soared to a record high, crossing the 50,000 level for the first-time before shedding those gains.

"Indian equities are already quite fully priced," according Alexander Treves, investment specialist for emerging markets and Asia-Pacific equities at JPMorgan Asset Management.

He pointed out that "the near-term outlook for India depends to some extent on India's success in rolling out a vaccine for COVID," and added that the market is already factoring in "some good news" on this front.

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India recently kicked off one of the world's largest coronavirus vaccination drives, aiming to inoculate more than 20% of its 1.3 billion people against Covid-19 in the first phase. Reuters reported, however, that the vaccination drive was hit by a delay due to glitches in an app used to coordinate the campaign.

"The stated plan is to vaccinate 300 million people by mid-year. While India is the world's largest vaccine manufacturer, the logistical challenges of a rollout of this magnitude are evident.," Treves said.

Kotak Institutional Equities Co-Head and Managing Director, Sanjeev Prasad, also said that "the (India) market looks quite fully valued."

Sensex briefly hit all-time high

Following declines in the last few trading days, the Sensex is up about 1.25% so far in 2021, as of its Monday close. In the same time period, the Nifty 50 has risen around 1.84%. India's markets were closed on Tuesday for a holiday.

Kotak's Prasad said a stronger-than-expected economic recovery was part of the reason why the Sensex hit a new record. Other reasons included expectations for "robust earnings growth" as well as low global and domestic bond yields.

"The Indian economy continues to gather momentum as can be seen in most high-frequency indicators; the sharp decline in confirmed and active Covid-19 cases will allow further reopening of the economy," said Prasad, who is co-head and managing director at the firm.

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India has "met with success" in containing the pandemic and in keeping infections under control, DBS Group Research Economist Radhika Rao said in a note dated Jan. 18.

The country has seen an 80% drop in daily number of cases compared to September, despite more people moving around and more economic activity, she said.

India has the second-highest number of coronavirus infections globally, behind only the U.S., according to data from Johns Hopkins University.

Data from India's Ministry of Health and Family Welfare showed more than 10.6 million have been infected while 153,587 lives have been taken, as of 8:00 a.m. local time on Tuesday.