In a nuanced market analysis, UBS has labeled India as the “least attractive” among major global markets, aligning it with Saudi Arabia, Singapore, and Thailand in its underweight assessment. The brokerage firm attributes this stance to “expensive valuations” and the “ordinary fundamental performance of companies.” As the specter of 2024 looms, analysts are reevaluating market expectations, with UBS expressing concern about potential risks stemming from El Nino affecting rural demand and the upcoming Indian elections.
Sunil Tirumalai, a strategist at UBS Securities India, cautions that the market might be overlooking risks, citing the current focus on regime continuity in the upcoming elections. He emphasizes the possibility of a reversal in the ‘safety premium on India’ amid the tech upcycle and potential recovery in China, which could impact retail flows as bank deposits remain elevated.
Contrary to UBS’s cautionary stance, Morgan Stanley and Barclays are optimistic, favoring domestic cyclicals, including financials, consumer, and industrial stocks. Ridham Desai, Equity Strategist at Morgan Stanley India Company, acknowledges India’s strong earnings, macro stability, and domestic flows but highlights the event-heavy calendar as a potential source of volatility. Morgan Stanley projects a 14 percent upside to BSE Sensex by December 2024 in its base case, with targets of 86,000 and 51,000 in its bull and bear scenarios, respectively.
Market bulls find reassurance in the continued support from retail investors, particularly in mutual fund investments. Analysts recommend positioning in domestic cyclicals, anticipating strong growth and benign inflation, creating a favorable environment for financial, consumer, and industrial cyclicals to outperform.
Barclays echoes this sentiment, emphasizing that domestic cyclicals such as infrastructure, capital goods, financials, and consumer discretionary are well-positioned for earnings growth. Meanwhile, global cyclicals like metals and technology face more challenges.
Despite the divergence in views, the overarching theme underscores the importance of strategic positioning, with a keen eye on potential market volatility triggered by election outcomes and crude oil price fluctuations. Investors are advised to exercise caution and seek guidance from certified experts before making investment decisions.