Jan. 8 (Bloomberg) -- India’s stock market rating was raised at JPMorgan Chase & Co. after a drop in share prices yesterday on Satyam Computer Services Ltd.’s accounting scandal provided an “attractive buying opportunity.”

The recommendation was increased to “neutral” from “underweight,” JPMorgan strategists led by Adrian Mowat wrote in a report today. The 12-month price-to-earnings premium to other emerging markets has dropped to 16 percent from 77 percent a year earlier. Satyam’s scandal is “a company-specific problem,” JPMorgan said.

The Bombay Stock Exchange’s Sensitive Index, or Sensex, dropped a record 52 percent last year, ending a climb of more than sixfold over six years. The index is valued at 9.6 times reported earnings, down from a high of 31 times set in January last year.

“India is a powerful secular growth story that is partly dependent on external capital,” the JPMorgan strategists said. “This external capital dependency during the global credit crunch, combined with high inflation, was the main driver of our underweight in 2008. These headwinds seem to be easing now.”

India’s economy is expected to expand 7 percent in the 12 months to March 2009, after recording an average annual growth of more than 9 percent in the previous three years. Growth may slow to between 6.5 percent and 7 percent in the next fiscal year, Junior Industry Minister Ashwani Kumar said yesterday.

That’s compares with the International Monetary Fund’s 2.2 percent forecast for expansion in the global economy this year.

Easing Inflation

Easing inflation will also help India and other Asian markets rebound, JPMorgan said. Crude oil prices have dropped more than 71 percent from the July 2008 record. Copper, platinum, silver and other metals have also retreated.

The brokerage has “overweight” recommendations on China, Thailand and the Philippines, according to today’s report. Hong Kong, Australia, South Korea and Indonesia are rated “underweight” by JPMorgan, the report also showed.

The Sensex tumbled 7.3 percent yesterday, the most in more than two months. India’s market is closed for a holiday today. Satyam, the nation’s fourth-largest software developer, plunged 78 percent, the most since listing in 1992, after Chairman Ramalinga Raju said the company’s profits had been inflated for years.

“This is a stock-specific issue rather than a systemic one, and we believe it provides a good opportunity to close out our underweight,” the strategists wrote.

JPMorgan said it would continue to advise investors to own shares of Indian technology companies. The brokerage replaced Satyam with Infosys Technologies Ltd., the nation’s second- largest software services provider, in its list of recommended stocks.

The list includes shares of ICICI Bank Ltd., State Bank of India Ltd., Maruti Suzuki India Ltd. and Grasim Industries Ltd., JPMorgan said.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net

Last Updated: January 7, 2009 21:02 EST