Global brokerage Nomura has upgraded its investment view on the Indian equity market to ‘overweight’ from ‘neutral’, saying the structural attractiveness remains intact despite expected cyclical slowdown.
"The structural story of India is now well known as a major beneficiary of the ‘China+1’ theme, possessing a large,
liquid equity market," the brokerage said.
Nomura views the recent softness driven by higher oil prices as a chance to increase exposure. Though the weakness may persist in the near term, the brokerage said it is an opportunity, a window that might not be open for too long.
The expensive valuation in the Indian markets is likely to remain so in a scenario of continuity in policies and government, Nomura noted, adding that a cyclical slowdown is expected, but is unlikely to deter investor optimism.
The Indian stock market is benefiting from a K-shaped economy, high earnings growth market, earnings revisions and domestic flows still holding up well despite higher rates, it pointed out.
"It offers liquidity and serves as a counter-weight to North Asia during Western slowdowns and Chinese recovery disappointments. It hosts high-quality/growth stocks, albeit at higher valuations, and is less vulnerable to global trade slowdowns," according to the report.
The brokerage has also identified "intense politics" leading up to the May 2024 national elections, shifts in China's economic focus and continued high oil prices as risks to its investment thesis.
Nomura likes a mix of stocks with reasonable relative valuations and domestic growth areas such as ICICI Bank, Axis Bank, L&T, Reliance, ITC and MedPlus Health.
In its list of indicative stock ideas, the brokerage has also listed those that are expected to benefit from some structural themes like increasing EV adoption — Mahindra & Mahindra and Uno Minda.
(Edited by : Ajay Vaishnav)
