Stay defensive; bet on staples, pharma, power utility: UBS

According to him, a global risk-on can take the market higher. "But macro headwinds continue to be an overhang. That is why we are not so bullish on the market. Infact we are recommending investors to stay defensive on the Indian market," he adds.

He is advising investors to buy staples, pharma, and power utility like Power Grid, NTPC, even some of the private banks. "We like Dr. Reddy's , Glenmark ," he adds.

Also read: Liquidity keeping market afloat, macros remain poor, says Udayan

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.

Q: Where do you see the market moving from here? Do you think liquidity can pull it higher or are the macro headwinds going to peg it back?

A: I think liquidity, global risk-on are definitely bigger drivers for the market in India, given structural deficits etc. A global risk-on can take the market higher. But, macro headwinds continue to be an overhang. That is why we are not so bullish on the market. Infact we are recommending investors to stay defensive on the Indian market.

Q: What have you made of earning season so far? Has it met your expectations?

A: Earning season actually has been quite okay. It has been broadly inline. Obviously most earning seasons have mixed trends. Some companies do well, some companies disappoint. But if you look at the product picture, it has been broadly in inline with our as well as street estimates.

Unlike other cycles, this time the earnings downgrades cycle may not be that steep because you have already seen that last year. So, analysts’ estimates and expectations are already muted and more in synch with the reality of muted economic cycle. So, estimates were not very aggressive and therefore versus expectations the numbers have been quite okay.

Q: What about Bharti Airtel ? After this nearly 15% fall in 2 days, what are you telling your clients to do there?

A: That is a tricky one. If you look at long-term industry structure then obviously Bharti is a leader. There are three viable players around possibly over the longer term in terms of business model. But, in the near term, given the surprise on the quarterly numbers, which reflects competitive intensity, as well as the upcoming auction overhang, the stock may languish.

In the next three-six months, these (telecom) stocks will languish. Post the auction issue, these players should emerge stronger. Therefore, from a long-term bet, these stocks look interesting, but in the near-term there is clearly an overhang.