A strong pick-up in smartphone market is expected in the third quarter of 2017 driven by improved sentiments and inventory build up before the upcoming festive season, according to a report by JP Morgan.

The report estimated that demand was soft in the Indian smartphone market in the second quarter (April-June) 2017 compared to the year-ago period, given the lack of clarity around GST implementation that "postponed the usual inventory build".

Also the demand was impacted on account of slower conversion of feature phone users to smartphone users.

"We believe that sentiment has improved in early July and the third quarter of 2017 should see a strong pick-up with inventory builds and preparation for the peak sell through season in late third quarter and early fourth quarter," the report on 'India smartphone market' said.

It added the July-September quarter could see 25-30 percent sequential growth in smartphone units, implying a seven percent year-on-year growth.

The report noted that smartphones accounted for 45 percent of the total handsets in April-June quarter. It "may remain in the same range, affected in the short-term by the launch of the Rs. 1,500 ($23) Reliance Jio feature phone".

Last month, Mukesh Ambani-owned Reliance Jio had announced its new feature phone, offering life-long free voice calls bundled with 4G data streaming at an "effective price of zero". The phone, targeted at 50 crore feature phone users in the country, will be available for pre-booking from August 24 on payment of a refundable security deposit of Rs. 1,500.

"This is likely to appeal heavily to current feature phone users, who are primarily on the 2G network. This may slow the migration from feature phone to smartphones for some users in the near term...," the JP Morgan report said.

However, as prices come down, the adoption should again pick up, the report added.