Wondering Where Markets Are Headed Next? JP Morgan Sanjay Mookim Says THESE Three Sectors Could Take Off

At least three sectors are set to witness a massive gains in the coming months, aided by multiple factors like a potential rate cut by the Reserve Bank of India (RBI), recovery in demand and impact of price cuts by companies, according to Sanjay Mookim, Head of India Equity Research, JP Morgan.

It is important to focus on sectors where price cuts, either through policy or company strategy, can drive an "elasticity of volumes,” suggests Mookim.

“What I would argue is that we look for sectors where the price cuts drive elasticity of volumes,” he said during a conversation with NDTV Profit on Friday. 

He projected an upbeat trajectory for auto, consumer discretionary and real estate sectors, which are likely to witness massive growth.

“We like the auto space. The discretionary auto space is where the impact of price cuts can be a little bit more permanent,” he said.

He explained that for entry-level cars, which are often financed via loans, lower tax-led prices and interest rates have a direct impact on a buyer's EMI, making it a key decision driver. “A lot of company strategy also matters; is the company taking the opportunity to drive its own volumes? The discretionary auto space is where we think the impact of price cuts can be a little bit more permanent,” he added.

Mookim also hinted at a nascent recovery in demand in the consumer discretionary segment. He outlined that the RBI's consumer confidence survey for urban discretionary items was "ticking up even before the GST cuts came in."

The seasoned analyst is also bullish on the real estate sector as the pre-sales hold firm despite oversupply worries in some markets like Mumbai.

“In several micro markets, there is a concern of oversupply. But what we are encouraged by is that there are still volumes that are going through, the pre-sales numbers are holding up,” he said.

Mookim explained that the sector has moved to a capital churn model: build, sell, collect and move on. He added that further RBI rate cuts would act as a tailwind.

Regarding global headwinds, Mookim commented, “It is very difficult to imagine how global uncertainties and volatility, at least policy-wise, get any worse. It's already there, too many things going on, too many variables and it's very intriguing to see why equity walls are so low in the context of all policy uncertainties, the geopolitical challenges that we are facing.”

He noted that while local institutions now own more of the Indian market in aggregate, FIIs "still dominate ownership of the large caps." According to Mookim, the ultimate trigger for FIIs is a "growth differential."

"There has to be ultimately a growth differential in my favour. India needs to start to deliver better growth, in contrast to the growth that is available elsewhere in the world. That is the trigger for flows to come back to India,” he said.