CLSA expects Nifty to build 10% returns in one year

The brokerage believes that the government does not have the fiscal space to stimulate the economy through spending.

However, it remains hopeful of some low fiscal impact measures to augment housing demand. The research house is also optimistic on a few factors like the rate transmission, excess liquidity, equity infusion and a nudge from the government.

"Incremental interest from the foreign private equity /sovereign /pension funds, etc, in real estate sector can potentially help drive up investments," it said.

CLSA said that although the economic data is likely to remain weak over the next 2-3 quarters, positives mentioned above will play out in the medium-term.

Valuations are turning favourable as Nifty now trades at 16.8x 1Y PE or 8 percent premium to last 10 years average, the brokerage house said.

Among the large caps, the research house bets on HDFC, IndusInd Bank, LIC Housing, SBI, GAIL, NTPC, Motherson Sumi, Cadila Healthcare, Sun Pharma and L&T. Other top picks are ICICI Bank, HCL Technologies, Reliance Industries, ICICI Prudential Life Insurance, Godrej Properties and Bharti Airtel.