Among EMs, India is the weakest market year-to-date: UBS

Even after a correction, India is an expensive equities market compared with its Asian peers and has witnessed the weakest performance on a year to date basis among all emerging markets, says Sunil Tirumalai, ED, India Strategist at UBS. He further adds his view on the earnings growth trajectory in India being normal and not super exciting, but on the contrary, markets such as China , Korea, Taiwan are recovering with a sharp uplift in earnings.

At least 35 of the 50 Nifty stocks are witnessing earnings cut for FY24, says Tirumalai. The biggest worry is when the money of Indian households and HNIs flow out of markets. "Last year there was a lot of household money that was supporting the markets, but today the deposit rates are increasing which has led to the outflow of retail investors money". Tirumalai feels there is some more underperformance warranted before one can turn constructive on Indian equities.

What has held up the earnings so far was the heavy weight- banks which have shown a good performance with NIM expansion, but that cycle is changing today with the increase in deposit rates. He further adds that "markets are factoring a high probability of recession in the US and hence we are skeptical on commodities, chemicals, IT."

While developed market banks are undergoing a setback with liquidity and leverage issues, its impact on India is expected to be limited. This is owing to good regulations and strong health of Indian banks.

He does not feel India to be  severely impacted if the US heads into a recession. "We were overweight on India 15 months ago, but now turned  underweight and if valuations turn favorable we could get constructive on Indian markets soon, which requires another 10 percent underperformance versus emerging markets".

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