UBS is positive on Indian equities and expects an 8 per cent upside in Nifty 50 to a one-year target of 26,000. It believes that India is better-placed than its Asian peers to weather US tariffs impact and a global growth slowdown and that valuations are reasonable with the market’s one-year forward PE multiple at past seven-eight year average.

The brokerage is positive on consumption-oriented sectors spanning retail, staples, two-wheelers and travel. It is positive on financials, real estate, cement and hospitals. It is less sanguine on industrials and infrastructure, as government capex growth should be low at mid-to-high single-digit CAGR over FY25-27.

“The eighth pay commission payouts strain fiscal space; the combined fiscal deficit of the State governments is close to 3 per cent and ongoing social welfare spending places further capex constraints and some private capex could be impacted given uncertainty over global growth,” the brokerage said.

Stronger consumption

The brokerage expects a consumption-led recovery in FY26 and FY27 after a weak consumption and capex cycle in FY25. Lower oil prices will aid GDP growth and help in lower inflation, it said.

The consumption stimulus of ₹7 lakh crore more than compensates for ₹1.5 lakh crore shortfall created by slowdown in personnel credit growth and should spur consumption growth, according to UBS. It believes falling food inflation should aid recovery for weak mass urban demand.

“We think banking credit growth should pick up, driven by the normalisation of the housing cycle, improved system liquidity; lower interest rates and the RBI reducing risk-weighted assets, liquidity coverage requirements and deferring expected credit loss guidelines,” UBS said.

Published on May 6, 2025