Financials, consumption and housing: UBS' key India themes going forward

Financials, consumption, and housing: UBS' key themes for the Indian market, going forward

Financials and consumption look promising for UBS in India, and it sees FY26 overall earnings growth to be in the double digit, which would be a 'reasonable' expectation.

Gautam Chhaochharia, Head of Global Markets at UBS told CNBC-TV18 during a conversation, "We are broadly positive on the financials as a thematic, and one of the things we pick up from investors globally - not just domestic - is that India is one of the unique capital markets. What we are seeing at the sector-level is not surprising; there's a long way left about it.”

On Q4FY25 earnings, Chhaochharia said that even though expectations were subdued, still a rebound in share prices was already anticipated. "Double-digit earnings growth for FY26 is reasonable. Policy easing cycle has not played out completely," he added, even as expectations are still not optimistic in general, even for a second-half recovery.

Chhaochharia said he expects recent fiscal measures to support consumption. “We will be seeing consumer stimulus - 2% of GDP - social welfare schemes, pay commission and the tax break. We believe the next year or two, consumption as a theme should do well. We like everything, but aviation, hotels, leisure are better placed,” the UBS analyst added.

Gautam Chhaochharia also flagged off cement as an under-appreciated opportunity, and said there is improvement in input cost, demand-supply possibility, and housing cycle potential. Alongside, he is also bullish on defense, considering indigenization to be a significant driver in this space.

Even as global macros remain a bit of an overhang, UBS is expecting some relief. “The respite is pullback on tariffs, a sharp one,” he said, noting that over the last three months, the key issue has been uncertainty rather than the tariffs themselves.

On fund flows, Chhaochharia said India's relative positioning in global portfolios is currently neutral to underweight, which limits the downside, in the event of any external shift. “In general, if China revives, it's great for emerging markets as an asset class, and also good for global growth. Unlike last year, India's positioning is not heavy - it is neutral or underweight - so there won't be much impact.”

On the whole, UBS has maintained a bullish stance on consumption-led plays, while advising investors to tread carefully at current levels, as the easy part of the rally may be behind us.