Gautam Chhaochharia of UBS Securities is neutral on state-owned banks and non-financial banks.
The Nifty50 has corrected more than 300 points in the last couple of weeks due to sharp weakness in rupee on account of decline in emerging market currencies against the US dollar. Renewed trade tensions between US and China and volatility in crude oil prices also dented investor sentiment.
"Currently, the market risk reward is still unattractive despite current correction, though we are still constructive and don't see material downside with global perspective," Gautam Chhaochharia, MD and Head of India Research, UBS Securities told CNBC-TV18.
As the global trade war escalated, the downside for US and European markets, if it happens, would be meaningful, he said.
UBS Securities is overweight on IT and corporate lenders while it is underweight on industrials, infrastructure and midcaps.
In the consumption space, he expects for some companies, earnings will surprise positively over next one year but one should be selective. Asian Paints, Hero MotoCorp, Maruti Suzuki and PVR are their preferred consumer stocks.
UBS Securities is neutral on state-owned banks and non-financial banks.
"Private banks - especially retail and corporate lenders have got a lot of attention from investors in last couple of months. We are overweight on the sector," Chhaochharia said.
He believes the growth recovery in sector is not as high or optimistic as the market expected. "Earnings data on the basis of 2-year compounded growth for Nifty is flat, which shows that base effect is playing role in earnings growth."
So he advised one should be selective in FMCG stocks, where earnings could surprise. "We are not advised Overweight call on the sector."
According to him, the correction happening in FMCG space may be because of portfolio positioning from FMCG to IT and pharma where investors are seeing opportunity after rupee fall.
Pharma"We are neutral on pharma space as US generics etc have not seen turnaround sharply though positioning like rupee will definitely help these stocks," Chhaochharia said.