Global brokerage firm JP Morgan has downgraded Indian equities to 'Neutral', citing rising macro risks, earnings pressure and limited exposure to new-age technology, even as it turns more bullish on Asian technology stocks led by Taiwan amid an accelerating artificial intelligence (AI) cycle.

In its latest Asia Equity Strategy report dated April 24, the brokerage said it is repositioning portfolios towards tech-heavy markets, noting that "we lower our allocation in Indian equities to Neutral," while upgrading technology and Taiwan in its regional allocation.

The shift comes as AI momentum strengthens across Asia. "There has been a sharp acceleration of gains across AI stocks in Asia this month," the report said, adding that improving developments around model capabilities, pricing and funding have "materially raised the future growth trajectory."

JP Morgan noted that the macro environment is also evolving, with risks of persistent inflation and slower growth shaping investment strategy.

"From a macro perspective, this should most closely resemble another bout of 'stagflation'... investors should focus on non-economically sensitive structural growth opportunities," it said.

Against this backdrop, the brokerage flagged multiple headwinds for India. It said the downgrade reflects "elevated valuations relative to EM [Emerging Markets] peers, earnings risks, dilution concerns and limited exposure to next-gen tech.

"On valuations, the report noted that while India's premium has moderated, it remains high. "India's premium to MSCI EM has compressed to 65 per cent... but peers like Korea, Brazil and China still offer cheaper entry points," it said.

Earnings outlook is also under pressure due to global uncertainties. "Energy supply disruptions are likely to pressure earnings through multiple channels... we lowered CY26E/27E MSCI India EPS growth... to 11 per cent/13 per cent," the brokerage added.

JP Morgan further highlighted structural concerns such as heavy equity issuance and limited exposure to emerging sectors.

"India's large-cap index has minimal AI, datacenter and semiconductor representation," it said, adding that capital raising through IPOs and stake sales is "diluting existing holders and capping upside."

The report also flagged risks from a potentially weak monsoon and global commodity trends, noting that rainfall below normal levels could hurt rural incomes and fuel inflation.

Despite the downgrade, the brokerage maintained that India's long-term story remains intact. "India's structural growth story remains strong," it said, supported by policy reforms, capex push and manufacturing growth.

Overall, JP Morgan said it sees better opportunities in other emerging markets in the near term, especially in technology-driven economies, as AI-led growth reshapes regional equity strategies.

Published on April 26, 2026