Why UBS Is 'Underweight' On Indian Markets Despite 'Fairly Stable' Macros
Indian companies are not investing in growth and capex has largely been flat for the last 12-13 years, UBS' Sunil Tirumalai says.
UBS AG is 'underweight' on Indian stocks even as the domestic economy is seen as a bright spot among global peers.
“Our policymakers have managed to keep our macro risks controlled and from politics and geopolitics, we seem to be fairly stable, but that is the economy,” Sunil Tirumalai, head strategist at UBS India, told BQ Prime. “For me, the market is different.”
Indian companies are not investing in growth and capex has largely been flat for the last 12-13 years, Tirumalai said. India has seen one of the weakest foreign flows in the last three years as growth is “kind of ordinary and valuation is expensive”, he said.
UBS’ stance is contrary to the optimism among other analysts who track Indian markets. JPMorgan raised India’s rating to ‘overweight’ citing investments and demographic trends. India is the fastest growing economy among large global peers.
Earnings
Nifty earnings forecasts have seen a cut in the last one month, led by the financial and information technology sectors, according to Tirumalai. While it's a “mixed result season”, earnings downgrades indicate that “something has gotten missed”, he said.
Stable Economy
The economy will continue to be stable, growing 6.2% in FY25 and UBS has revised the forecast higher for the current financial year, said Tanvee Gupta Jain, India economist at UBS.
November to March CPI inflation is seen at 5-6%, and will be 5.5% for the full year, she said.
