The Indian stock market's standout performance among emerging markets in recent times may well have been a case of running up too soon, too fast.
That's according to James Sullivan, head of Asia Pacific equity research at JPMorgan. A reason why the firm is turning cautious on India.
"All emerging markets for us have underperformed with the exception of India, which has been a core outperformer, delivering 18% returns so far this year," he told Bloomberg Television in an interview.
Calling it "somewhat idiosyncratic", Sullivan said the rate of change in Indian firms from an earnings revision perspective is "significantly slowing", suggesting that the rally may not be sustainable.
We do think the same will be true of economic growth, so we are turning cautious on the Indian market, particularly on a relative basis.James Sullivan, JPMorgan
India's benchmark NSE Nifty 50 index has gained over 19% so far this year, compared with China's Shanghai Composite index's 2% rise.
In the second half of the year, the assumption is that the Chinese economy is going to pick up steam, triggering a rotational trade out of India and back into its neighbour to the east, according to Sullivan.
Internet Stocks Opportunity
Still, there has been an increase in investor interest in Asean and Indian internet stocks, he said. "We expect that to be a significant theme over the course of the next few years. This trend will see fund flows out of China's platform names into the internet firms in the rest of Asia."
"We're certainly excited about that opportunity from a research perspective," Sullivan said.
Watch the interview below:
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