JPMorgan has issued a cautionary note as Indian equities enter the December-quarter results season, warning that double-digit earnings growth is now essential to sustain the country's elevated market valuations. The global brokerage reports that Indian stocks begin Q3 with Nifty earnings growth of approximately 7% annually, while JPMorgan's coverage universe shows 9% growth.

Sector Performance Outlook

The earnings landscape presents a mixed picture across different sectors, with clear winners and laggards emerging for the quarter.

The December quarter marks the first full period following GST cuts, making management commentary on demand and pricing particularly crucial for investors and analysts.

Market Targets and Earnings Projections

JPMorgan maintains its established Nifty targets across different scenarios, reflecting confidence in its analytical framework despite current challenges.

Looking ahead, the brokerage expects MSCI India earnings to demonstrate stronger momentum, with projected growth of 13% in CY26 and 14% in CY27. JPMorgan believes the worst of earnings downgrades is now behind the market.

Margin Recovery and Economic Backdrop

Margins are expected to show modest recovery across the board, supported by improving operational conditions. Nifty EBITDA margin is projected to rise 88 basis points quarter-on-quarter, while JPMorgan-covered companies are expected to see a 36 basis points improvement. This recovery is attributed to easing input costs and operating leverage benefits.

Nominal GDP growth is projected to improve to 9-9.5%, providing fundamental support for earnings momentum. The brokerage anticipates that consumption, construction and capex-linked sectors will show the earliest signs of operating leverage as macro tailwinds build.

Strategic Positioning and Sector Preferences

JPMorgan's current positioning reflects a clear preference for domestic-facing sectors over exporters, given the uncertain global backdrop.

Overweight Sectors:

• Financials
• Materials
• Consumer Discretionary
• Consumer Staples
• Hospitals
• Real Estate
• Defence
• Power

Underweight Sectors:

• IT
• Pharma

The brokerage recommends investors stay tilted toward domestically driven businesses with pricing power and volume visibility, while exercising caution on export-heavy sectors exposed to global growth and currency fluctuations. Stock selection is expected to matter more than broad index moves as markets transition from multiple-driven gains to earnings-driven performance.

JPMorgan has initiated coverage on two prominent wire and cable companies, KEI Industries and Polycab India, with overweight ratings and substantial upside projections. The brokerage firm announced these recommendations on Monday, January 12, highlighting the companies' strategic positioning in India's electrification landscape.

Price Targets and Upside Potential

JPMorgan has set ambitious price targets for both companies, reflecting strong confidence in their growth prospects:

Shares of KEI Industries ended the previous session 1.8% lower at ₹4,325.00, though the stock has gained 15.9% over the last six months. Polycab shares declined 0.8% to ₹7,690.00 in the previous session, while maintaining a strong 23% gain over the past year.

Strategic Investment Thesis

JPMorgan's bullish stance is anchored on several key factors that position both companies favorably in the evolving energy landscape. The brokerage views these wire and cable majors as offering 'picks and shovels' exposure to structural trends of electrification and energy transition. This positioning allows investors to benefit from India's broader infrastructure development and renewable energy adoption without direct exposure to project-specific risks.

The firms are expected to benefit from near-term earnings-per-share upgrades, driven primarily by rising copper prices in global markets. JPMorgan's financial year 2027 EPS projections for both companies are notably optimistic, standing 8% to 12% higher than consensus estimates.

Industry Dynamics and Competitive Landscape

While acknowledging potential challenges, JPMorgan maintains confidence in both companies' competitive positioning. The upcoming entry of large conglomerates into the wire and cable segment could impact industry margins and Return on Capital Employed. However, the brokerage believes KEI Industries and Polycab are better positioned compared to peers to navigate this increased competition.

Notably, major conglomerates have announced their entry into this space. In March of the previous year, Adani Group entered the cables and wires sector through its subsidiary Kutch Copper, which incorporated joint venture company Praneetha Ecocables with a 50% stake. Additionally, UltraTech Cement announced plans in February of the previous year to enter the wires and cables segment with a capital expenditure of approximately ₹1,800.00 crores over two years.

Analyst Sentiment and Market Position

Both companies enjoy strong analyst support across the investment community:

The overwhelming analyst support, with 18 buy recommendations for KEI Industries and 25 for Polycab, reflects broader market confidence in the wire and cable sector's growth prospects. This positive sentiment aligns with JPMorgan's assessment of the companies' potential to capitalize on India's infrastructure development and energy transition initiatives.