India at top of the chart in terms of valuations, says UBS Securities

This past week, the Street has heard a bullish medium-term view from Morgan Stanley though in the absolute near-term, even MS is less bullish. Today, the street is getting a slightly opposing point of view from UBS, which is worried both about the near-term macros like the global slowdown, and about the rich valuations of Indian stocks. Ahead of the bank's investor conference, the top UBS securities' team — Tanvee Gupta Jain, India Economist; Sunil Tirumalai, Strategist; and Vishal Goyal, Head of Research and Bank Analyst at UBS Securities — discussed the India outlook in an interview with CNBC-TV18.

According to Tirumalai, from the global perspective, India is completely priced out. “It is at the top of the charts with respect to valuations,” he said.

Any incremental improvements in other markets or geopolitical settlements could lead to underperformance for India, he added.

The worry for the market is more from the valuations perspective.

As far as earnings are concerned, there is 9-10 percent growth for the ongoing fiscal and a similar kind of growth next fiscal too. That probably means some downside to where the consensus currently is.

The world's largest and most popular virtual currency, Bitcoin, slumped 11.1 percent to $16,115.1. Its market value stood at $310.8 billion. The trade volume was at $106.1 billion. The token has fallen to two-year low.

The second largest virtual currency, Ethererum or Ether, slumped 11.9 percent to $1,141 with a market capitalisation of $139.6 billion. The trade volume of Ethereum stood at $40.1 billion in the last 24 hours.

From the Indian market perspective, Tirumalai isn’t worried about the cryptocurrency. “These are the things which are unfolding. So from an Indian market perspective, I wouldn’t be too worried about that as its direct rub-off on the Indian market would be fairly less.”

UBS’ global economics team is forecasting a 2.1 percent year-on-year global GDP growth for 2023. It will be the lowest since 1993, excluding the pandemic and GFC.

So, while Tanvi Gupta Jain agrees with the fact that India is going to be the among lesser affected economies due to the spill-over effect of a global slowdown, her view is that the country is not immune.

“So, factoring in the delayed impact of monetary tightening on domestic demand and a slowing global growth, we are estimating India's GDP growth to slow down to 5.5 percent for the 2023-24 fiscal. And the consensus is still at 6.2 percent, where I do see that there could be more downside over the coming months, which will be visible on the numbers,” she explained.

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