JPM Indo Mkt Strategy

Aditya Srinath: reasons to be cautious. 5 reasons to lay off the Kool-Aid: (1) Earnings revisions have turned negative, (2) Inflation is going up – pipeline inflation is above comfort levels: J.P. Morgan forecasts inflation of 6.3% at year end, higher than BI’s comfort zone. (3) Liquidity has tightened, interest rates have started moving higher: The JIBOR has started moving higher and money supply growth is lagging nominal GDP. (4) Market breadth narrowed significantly in 2Q: Five stocks (UNVR, ASII, GGRM, BBRI, BMRI) accounted for 100% of the JCI’s move in 2Q. (5) Where are the reforms? Growth is being driven by cyclical momentum; we have struggled to list reforms carried out over the last year.