UBS finds 4 reasons to be bullish on Indian stocks, picks 4 fav sectors

Economic Times

06-05-2025

UBS forecasts an 8% Nifty 50 upside over the next year, driven by a Rs 7 trillion consumption stimulus, lower oil prices, resilient rural demand, and attractive valuations. The brokerage favours financials, autos, real estate, and consumption sectors, while remaining cautious on IT, industrials, and pharma due to global uncertainties.
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
UBS's top sectors for growth
Caution on certain sectors
Market outlook
Tired of too many ads?
Remove Ads
UBS Securities has laid out four compelling reasons for its bullish outlook on Indian equities, forecasting an 8% upside for the Nifty 50 index over the next 12 months. The brokerage pointed to a consumption-driven recovery, aided by fiscal stimulus , lower oil prices , and strong rural demand as major growth catalysts.With a favourable macro backdrop, the brokerage is particularly optimistic on sectors like financials, autos, and real estate, while remaining cautious on industrials and IT.UBS sees India's market set for growth due to a combination of factors. First, the brokerage said it expects a consumption -led recovery in FY26 and FY27, underpinned by a substantial Rs 7 trillion consumption stimulus—equivalent to around 2% of GDP. This stimulus, combined with resilient rural demand driven by favorable agricultural conditions and rising rural wages, is expected to drive consumption growth despite a slowdown in personal credit expansion.Second, UBS noted that falling oil prices are expected to aid GDP growth by lowering inflationary pressures, providing a positive macroeconomic environment for Indian equities.Third, UBS said it believes India is better positioned than its Asian peers to weather the potential fallout from US tariffs and a global growth slowdown. The country's relatively insulated economy, coupled with lower crude oil prices, positions it advantageously in an uncertain global environment.Lastly, UBS points to attractive valuations , with the market's one-year forward price-to-earnings (PE) ratio aligning with the 7-8 year historical average, further supporting its bullish outlook.The brokerage is particularly bullish on four sectors, which it believes will lead the charge in India's recovery:UBS said it expects banking credit growth to pick up, driven by improved system liquidity, a favorable interest rate environment, and regulatory support.Retail, FMCG, two-wheelers, and travel are seen as prime beneficiaries of the consumption recovery, fueled by government stimulus and strong rural demand.With improved consumer sentiment, UBS sees strong growth potential in the two-wheeler and passenger vehicle segments.UBS is positive on the real estate sector, benefiting from recovering demand and supportive macro conditions such as lower interest rates.While UBS is optimistic about these key sectors, the brokerage is cautious on industrials, IT, and generic pharma exporters. UBS noted that government capex growth is expected to remain muted, and global growth risks continue to impact the IT and pharma sectors.UBS said it expects the Nifty 50 to reach 26,000 over the next year, supported by a recovery in consumption and favourable economic conditions. However, it also cautions that a global growth slowdown could result in a 6% downside to the index.Despite these risks, UBS's overall outlook for Indian equities remains positive, with consumption, lower oil prices, and strong rural demand seen as key drivers for the market's outperformance.Also read | Tale of 2 countries: Pakistan stock market down 4% post Pahalgam attack, India's Sensex gains 1.5% (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)