Latest news with #MSCIEM
Mint
2 days ago
- Business
- Mint
Expert view: Market valuation looks stretched; maintain a 5–10% allocation to gold, says Rishabh Nahar of Qode Advisors
Expert view on markets: Rishabh Nahar, Partner and Fund Manager at Qode Advisors, is reducing the overall market exposure and shifting focus to select unique stock ideas where he still sees strong earnings momentum and low volatility, offering a good balance of risk and reward. In an interview with Mint, Nahar shares his views on market valuations, sectors to watch and strategy for gold. Here are edited excerpts of the interview: We are watching the post-Q1 rebound not just as a statistical uptick, but as confirmation of our momentum signals realigning after a brief drawdown. The 4 per cent YTD (year-to-date) gain in the Nifty 50 versus nearly 10 per cent in the S&P 500 and nearly 8 per cent in MSCI EM tells us that Indian mid- and small-caps were oversold earlier in the year. Once breadth improved and volatility cooled, our trend-following algorithms signalled a switch from defensives back into risk-on trades, which helped us capture that steady grind higher through May. Looking ahead, I expect this orderly advance to persist so long as corporate earnings surprises remain positive and global macro risks stay contained. From a risk‐management standpoint, we'll maintain a modest volatility skirt around key support levels and hedge if our downside‐break thresholds are breached, but for now, the models favour staying long the market's run. On valuations, our factor overlays highlight that forward PEs near 20 times sit at multi-year highs, which historically compress future excess returns. Quantitatively, this means our valuation screens are flagging fewer new buys at the index level, and instead we're tilting toward sectors where our earnings-growth forecasts outpace implied growth baked into current prices. In practice, we're lowering our broad‐market risk budget and reallocating it to idiosyncratic ideas, where our earnings‐revision models and low‐volume screens still show attractive risk–reward profiles. In sum, while broad-market returns may settle into mid-single digits from here, a disciplined factor blend and rigorous risk controls should allow us to outperform that baseline. Quarter-four earnings paint a picture of breadth rather than brilliance. Across the top 500 listed companies, median profit after tax advanced roughly 10 per cent quarter-on-quarter while sales rose about 5 per cent, with 69 per cent of firms posting positive profit growth. Crucially, the dispersion favoured the interior of the market-cap curve: mid- and small-cap names delivered profit growth north of 20 per cent, versus low-single-digit advances for large-caps. Factor diagnostics we run internally, profit revision momentum, sales acceleration, and operating-leverage screens, confirm that the earnings pulse is strongest in capital goods, select metals, and telecom, where pricing power and execution gains are translating cleanly into cash flow. At the index level, the Nifty 100 'beat-or-meet' ratio has climbed back to 51 per cent, the best reading since mid-2023. This indicates that analysts' downgrades earlier in the year have finally reset the bar to achievable levels. Taken together, the quarter shows that profit growth is broad-based enough to sustain the cycle, but not yet explosive enough to justify fresh multiple expansion on its own. Looking ahead, the market's next leg higher still hinges on a handful of catalysts that are measurable in our models but uncertain in their timing. Foremost is monetary policy: with headline CPI drifting below the Reserve Bank of India's 4 per cent midpoint, the window has opened for an initial 25- to 50-basis-point cut; a sustained easing cycle would lower discount rates and support rate-sensitive factors such as quality growth and housing proxies. A second variable is the monsoon, which the IMD now projects at 106 per cent of the long-period average. Early rainfall could revive rural purchasing power and lift two-wheeler, FMCG and agro-inputs volumes into the festival season. Third, clarity on US-India trade rules, especially around technology transfer and critical minerals, would help de-risk export-linked earnings streams. Finally, corporate capex intent remains high on survey data but is yet to translate into hard spend; a visible pick-up in order books would underpin earnings trajectories for FY 26-27. Valuations, meanwhile, leave little cushion: the Nifty trades near 22 times forward earnings, or roughly one standard deviation above its decade average, so any disappointment on these triggers could compress multiples. That is why, despite our constructive three- to five-year view on India's structural story, we continue to run fully invested but factor-balanced books tilting toward companies with improving earnings revision momentum, clean balance-sheets and demonstrable pricing power, while hedging outliers through disciplined risk overlays rather than trying to time six- or twelve-month index levels that, in truth, no one can consistently forecast. The Indian defence industry has demonstrated strong engineering capabilities in recent military operations and benefits from steady domestic demand alongside growing export opportunities. While the military-industrial complex is well-positioned to become a significant contributor to the economy, it is challenging to determine whether this optimism is already reflected in current valuations and whether the sector can deliver truly outsized returns going forward. We no longer distinguish between PSU and private banks—both segments have delivered strong returns in the past when operating performance was robust and valuations were attractive. Our focus today is on identifying banks whose future growth prospects are meaningfully underappreciated by the market. At this juncture, we do not see any banking stocks offering that degree of asymmetry. While many banks remain solid businesses, none currently meet the elevated return expectations or risk–reward thresholds we require for new convictions. One compelling growth driver is the ongoing US–China trade tensions, which have spurred higher import tariffs and stricter regulatory scrutiny on Chinese pharmaceutical suppliers. India's well-established API manufacturing base, combined with a rising focus on differentiated products and biosimilars, positions Indian pharma companies to capture these displaced volumes in regulated markets. By moving up the value chain—from pure generics to high-complexity formulations and speciality injectables—Indian firms can secure premium pricing, deepen customer relationships, and meaningfully increase their US market share over the next two years. We advocate maintaining a 5–10 per cent strategic allocation to gold across all time horizons. This positioning serves as an effective hedge against inflation, negative real rates, and geopolitical uncertainty. We recommend adding to positions on meaningful pullbacks, as even a modest allocation can help dampen the volatility of an equity-heavy portfolio. Read all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
Bloomberg
3 days ago
- Business
- Bloomberg
Emerging-Market Stocks Gain as China Data Refuel Stimulus Hopes
Emerging-market stocks advanced for the first time in three days as a slump in China's factory activity increased bets on more economic stimulus. The benchmark MSCI EM index rose 0.4% after data showing China's manufacturing sector had its worst slump since September 2022, with higher tariffs taking a toll on smaller exporters. The onshore CSI 300 Index gained 0.3%, while a gauge of Chinese stocks listed in Hong Kong jumped 1.9%.
India Today
24-04-2025
- Business
- India Today
UBS upgrades stance on Indian stock markets, but finds China ‘more attractive'
Global brokerage UBS has raised its outlook on Indian equities to 'neutral,' acknowledging the country's domestic resilience and structural strengths. Yet, despite India's promising fundamentals, China remains UBS's top pick among emerging markets (EM), thanks to cheaper valuations and a stronger risk-reward latest strategy note points to a potential tailwind for EMs as capital flows out of the United States—but only if fresh tariffs don't enter the picture. In this context, India ticks several key boxes: strong internal demand, earnings stability even in rough conditions, a likely boost from lower oil prices, and increasingly accommodative banks adjusting deposit rates downward despite tepid deposit UBS remains cautious on India's market outlook. While there's optimism around policy-driven consumption support, the brokerage flagged concerns about rich stock valuations and unclear signals from the government on whether it will shift decisively back toward growth and investment. Additionally, India's potential as a key node in the global supply chain remains questionable, UBS noted. 'India has shown impressive resilience, but high valuations and ambiguous policy direction temper our enthusiasm,' the report UBS continues to favour China, pointing to more compelling valuations and stronger defensive characteristics, especially in a world of shifting capital flows and uneven global growth. The brokerage is also betting on domestic stimulus in China to drive upside.'We see better risk-reward in China within EM: better defensiveness, lower valuations, and potential upside from stimulus/domestic flows,' UBS to the report, over a third of MSCI EM revenues are export-linked, with 13 per cent connected to the United States—a relationship that may come under strain amid rising trade friction. UBS forecasts EM earnings per share (EPS) to grow at a 15 per cent compound annual rate over the next two years, up from 11 per cent in the past that optimism is tempered by valuation sensitivities. UBS warned that EM equities remain exposed to movements in US corporate bond spreads. Historically, a 100 basis point widening in high-yield spreads has translated into a 1.4x contraction in EM price-to-earnings response, UBS is now tilting toward EMs with domestic consumption-driven growth models. Indonesia has been upgraded to 'Overweight', and India now shares a 'Neutral' spot in this reoriented of broad market plays, UBS recommends investors look at sectors with a record of earnings resilience—such as consumer staples, IT services, banks, retail, and utilities—as safer bets in uncertain times.
Business Upturn
24-04-2025
- Business
- Business Upturn
UBS upgrades India amid tariff wars across globe but still prefers China over India
By Markets Desk Published on April 24, 2025, 06:52 IST UBS has tactically realigned its emerging markets (EM) and Asia Pacific (APAC) equity strategy, citing increased global trade uncertainty and shifting capital flows. The global brokerage now upgrades Indonesia to 'Overweight' while moving India to a 'Neutral' stance, preferring defensive and domestic-focused markets over export-reliant economies. Why the shift? UBS believes EM equities may only outperform the S&P 500 in a 'no tariff' scenario, given that over 35% of the MSCI EM revenue comes from exports—with 13% of that to the US. The firm warns this exposure may be vulnerable amid rising tariff rhetoric and geopolitical shifts. UBS's new market framework prioritizes: Resilience to GDP slowdowns Domestic consumption-led growth Defensive sectors Benefit from lower oil prices Bottom-up analyst conviction India: ticks many boxes, but valuation still a concern While India meets several criteria—strong domestic focus, resilience to global GDP shocks, and oil price tailwinds—UBS believes stock fundamentals remain weak, and valuations are still above historical averages. The firm also highlighted lingering uncertainty around policy focus and India's positioning in global supply chains. India is now rated 'Neutral', with UBS continuing to prefer China within the EM basket due to its lower valuation, stronger stimulus potential, and more favorable risk-reward profile. Indonesia: top EM bet UBS upgrades Indonesia to 'Overweight', citing its domestic resilience and defensive economic structure. Valuations are now back near Covid lows, and the country's national leadership team post-elections is seen as supportive for growth. UBS views Indonesia as a strong beneficiary of ASEAN trade flows and relatively insulated from US-China friction. Other changes: South Africa has been moved to 'Neutral' , despite strong post-election returns. Hong Kong is also downgraded to 'Neutral', given its high exposure to global and US trade flows, and a preference for yield which UBS sees as risky amid high index volatility. Markets Desk at
Bloomberg
26-03-2025
- Business
- Bloomberg
Morgan Stanley Raises China Stock Targets Again Citing Earnings
Morgan Stanley strategists raised their outlook for Chinese stocks for second time in a little more than a month, citing upside for valuations amid an improving outlook for earnings. 'MSCI China is finally on its way – looking set for the first earnings beat after 13 consecutive quarterly misses, while earnings estimate reductions are approaching inflection,' strategists including Laura Wang and Jonathan Garner wrote in a note dated Tuesday. 'China deserves a valuation on par with MSCI EM, cutting its longstanding discount,' they added.
