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4d ago

UBS Adjusts Emerging Market Strategy, Elevates India to Neutral but Favors China

The global brokerage highlights India's domestic strengths but cites high valuations and policy uncertainty, while reaffirming China's appeal due to lower valuations and defensive advantages.

'India ticks a lot of boxes but': UBS upgrades domestic stock market, but still prefers China; here's why
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Overview

  • UBS has upgraded Indian equities to a 'Neutral' rating, acknowledging strong domestic demand, EPS resilience, and potential benefits from lower oil prices.
  • Despite the upgrade, UBS continues to prefer China within emerging markets, citing more attractive valuations, defensive characteristics, and potential upside from domestic stimulus and capital inflows.
  • Concerns about India's elevated equity valuations and ambiguous government policy direction temper UBS's enthusiasm for the market.
  • The brokerage remains skeptical about India's role as a beneficiary of global supply chain realignments, questioning its strategic positioning.
  • UBS has recalibrated its emerging market framework to prioritize domestically oriented economies, also upgrading Indonesia to 'Overweight' while advising sector-specific investments in consumer staples, IT services, banks, retail, and utilities.