Swiss brokerage UBS Securities remained bullish on domestic equities for 2015 while being overweight on banks and underweight on consumer staples and IT services.
"We remain bullish on Indian equities for 2015. The economic growth recovery underway will likely sustain current valuations, especially as it starts manifesting in both macro and micro data points. Unlike the last three years, we expect consensus earnings growth estimates of 15 per cent plus for FY16/FY17 to be met," UBS said in its report.
The sentiment amongst investors at the UBS India's 10th annual conference was clearly positive and interest in Indian equities was high.
Though they are also hopeful, most corporates expect the positive sentiment to translate into numbers only after one or two quarters. Macro speakers were more confident on India versus other emerging markets, and there is an optimism around the ongoing reform initiatives.
UBS report said it is overweight on banks and NBFCs, including HDFC Bank, Yes Bank, Shriram Transport Finance and Mahindra Finance. Among banks and NBFCs, management teams were cautiously optimistic on revival in business growth.
While they believe that current demand is still weak and capex cycle revival still 1-2 quarters away, they expect growth outlook to improve gradually in the second half of FY15 and FY16.
Asset financing firms are still witnessing subdued demand and meaningful recovery is likely only in FY16, the report said.
It is underweight on consumer staples Hindustan Unilever, Godrej Consumer Products and Marico. UBS pointed out that in consumer sector, companies talked about an improvement in consumer sentiment and consequently in gross margins aided by lower raw material costs though real volume growth has lagged.
The gap in growth rates between urban and rural markets has narrowed due to reduced rural stimulus, it said. The brokerage is also underweight on IT services sector.
