India offers best structural growth story among large economies: UBS
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India offers the best structural growth story among the large economies, global brokerage UBS said.
“Combined with political stability and supportive government policies, India remains in a favourable position and is the most preferred in our Asia ex-Japan asset class preferences among equities," UBS said.
India’s GDP growth has been surprisingly positive, averaging above 8 per cent in the first three quarters of FY2024, UBS said.
“We expect this momentum to continue as cyclical recovery and structural improvements remain in play. That said, the current global conditions may cause growth to moderate. Even after factoring in any slowdown, we believe India could still deliver 7 per cent growth in FY2025," UBS said.
"While India’s stock market valuation is one standard deviation above its 10-year average, we believe downside risks are manageable amid a supportive domestic macro and micro environment," it said.
“Additionally, we believe the reversal of the rate cycle could be valuation supportive as the equity risk premium falls," UBS said.
Recent shareholding patterns suggest the FPI ownership of India equities (BSE500 index) of 17.8 per cent remains at a decade low, while DII’s share has reached a record high of 14.3 per cent supported DII inflows.
The gap between the FPI and DII ownership has narrowed to just 3.5 per cent, which suggests that the dominance of FPI flows on Indian equities is shrinking.
"However, with FPI ownership at a decade's low, we do not anticipate significant outflows from the current levels," UBS said.
