UBS, a foreign brokerage, has taken a cautious stance on expensive markets like India, citing potential vulnerability in retail flows due to rising interest rates and the impact of increased oil prices.
Their analysis on India highlights the discrepancy between expensive market valuations and the ordinary fundamental performance of companies. UBS raises concerns about the market's oversight of risks related to rural demand impacted by El Nino. Additionally, they note the prevailing market sentiment leaning towards expecting continuity in the upcoming elections, potentially overlooking certain risks.
UBS outlines its market framework, considering various fundamental factors based on earnings, valuations, thematic elements, and quantitative factors that evolve based on current relevance. Within this framework, they find China, Brazil, and the Philippines to be more attractive, while India, Thailand, and Taiwan appear less appealing.
The broader trend across major emerging markets (EM) shows a shift from net foreign inflows to outflows in the last three months, particularly after the close of the third quarter. China and Taiwan were notable examples of markets experiencing selling foreign flows. South Africa, Taiwan, and Thailand saw intense selling concerning their market capitalization. Notably, India, Korea, and Brazil are among the few markets that have seen foreign buying this year, contrasting the overall trend in EMs.
This cautious stance reflects UBS's concern about the potential risks and market dynamics impacting various countries, emphasizing the changing patterns of foreign investment within emerging markets.
(With Agency Inputs)
ALSO READ | Morgan Stanley Forecasts Sensex to Hit 74K by December 2024
ALSO READ | RBI Bulletin Forecasts Accelerated GDP Growth for India in Q3 of 2023-24
