JPMorgan India still bullish on weak infra stocks

Enlarge Photo File photo of workers constructing a building in Bangalore, May 9, 2008. The Indian fund...

Tue, Jun 10 05:28 PM

MUMBAI (Reuters) - The Indian fund unit of JPMorgan is positive on industrial and infrastructure sectors, despite a sharp fall in their share values and is not averse to raising its exposure if they fell further, it said on Tuesday.

Stocks from the sectors have under-performed primarily due to concerns over their ability to pass on higher commodity costs to customers as well as execution-related challenges, the firm said in its monthly factsheet.

"We have analysed each of the businesses in our portfolio... in most cases we have found that the stock price reaction has been exaggerated and expect the stock prices to be marked up subsequently as market refocuses on business performance."

"We will not hesitate in adding to some of these businesses we like if the market sentiment brings the prices down to irrational levels."

The BSE Capital Goods index has plunged 41 percent this year, far more than the 27 percent decline in India's benchmark stock index, Reuters data showed.

Shares in engineering and construction firm Punj Lloyd Ltd and transmission lines contractor Kalpataru Power Transmission Ltd are down more than 50 percent.

However, JPMorgan said, the firms operating in these sectors had strong cash flows and would benefit from government policies.

The Indian government estimates $500 billion worth of investment is needed over the next four to five years to strengthen the country's transport and power backbone.

"We continue to believe that industrial and infrastructure capex will be a multi-year theme despite what the current stock prices seem to suggest," the firm said.

The firm was overweight on the two sectors in both of its domestic equity funds and had Bharat Heavy Electricals and Larsen & Toubro among its top-10 holdings in JPMorgan India Equity Fund at the end of May.

RECOMMEND THIS STORY