Why Consumption Trumps Capex in Current Market Conditions: JPMorgan's Rajiv Batra's Insights
Rajiv Batra, Head of Asia & Co-Head of Global Emerging Markets Equity Strategy at JPMorgan, discusses the shift towards domestic demand in India and other emerging markets. The focus is on consumption over capital expenditure, driven by fiscal policies supporting consumption. The portfolio is overweight on financials, consumer staples, discretionary (excluding auto), healthcare, power, defence, and real estate, while being underweight on IT, pharma, and auto.
Domestic DemandConsumptionCapexFiscal PoliciesJpmorganReal EstateAug 22, 2025
Batra's sectoral allocation reflects this focus on domestic demand. The portfolio is overweight on financials, consumer staples, discretionary (excluding auto), healthcare, power, and defence. They are also overweight on real estate, which is expected to benefit from lower mortgage rates and the upcoming festive season. However, the portfolio remains underweight on IT, pharma, and auto sectors, which are more exposed to global market uncertainties.
The market is currently in a state of mixed sentiments, with positive news from GST rationalization and fiscal support being offset by concerns over US tariff uncertainties. Despite the mixed feelings, Batra believes that the market is not fully discounting the potential positive impact of the GST cuts, which could provide a significant boost to GDP growth. The market is more focused on the downside risks, but the fundamentals and corporate earnings will ultimately drive long-term performance.
In the short term, the market is likely to remain volatile, especially with the upcoming deadline for US tariffs. However, Batra advises investors to focus on the medium and long-term fundamentals. The Indian domestic investor is becoming more sophisticated, using market opportunities to invest in quality names. This approach will help weather the short-term volatility and capitalize on the positive tailwinds from domestic demand.
Looking ahead, the sectors that are likely to participate in the rally are those aligned with the domestic demand theme. Financials, consumer staples, discretionary (excluding auto), healthcare, power, and defence are expected to perform well. Real estate is another sector that Batra is bullish on, given the potential for a rebound in demand during the festive season and the easing of monetary policy.
Batra's 30,000 bull case target for Nifty remains unchanged, as the overarching theme of consumption over capex is expected to continue. The global growth slowdown, particularly in the US, underscores the need for a domestic demand-driven strategy. JPMorgan expects US GDP growth to be around 1.6% this year and 1.5% next year, significantly below the potential growth rate. This makes it crucial for India and other emerging markets to focus on domestic consumption to drive economic growth.
Frequently Asked Questions
What is the main focus of JPMorgan's investment strategy in India?
JPMorgan's investment strategy in India focuses on domestic demand, particularly consumption over capital expenditure. This is driven by fiscal policies that support consumption, such as fiscal subsidies and tax cuts for the middle class.
Which sectors are overweight in JPMorgan's portfolio?
JPMorgan's portfolio is overweight on financials, consumer staples, discretionary (excluding auto), healthcare, power, and defence. They are also overweight on real estate, which is expected to benefit from lower mortgage rates and the festive season.
Why is JPMorgan underweight on IT, pharma, and auto sectors?
JPMorgan is underweight on IT, pharma, and auto sectors because these sectors are more exposed to global market uncertainties, particularly the US tariff uncertainties and the global growth slowdown.
What is the impact of GST rationalization on the Indian market?
GST rationalization is expected to provide a significant boost to GDP growth, potentially offsetting the negative impact of US tariff uncertainties. However, the market is not fully discounting this positive impact yet.
What is JPMorgan's outlook for the Indian market in the short and long term?
In the short term, the Indian market is likely to remain volatile due to US tariff uncertainties. However, in the medium to long term, the fundamentals and corporate earnings will drive performance, and the focus on domestic demand will be crucial for economic growth.
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