Mumbai, 2025 – UBS continues to hold an ‘underweight’ view on Indian equities, favoring markets such as China, Taiwan, and Korea, citing high valuations and limited participation in the global artificial intelligence (AI) investment trend.

Speaking at the UBS India Summit, Sunil Tirumalai, Global Emerging Markets Strategist at UBS, noted that while large Indian companies have performed steadily, their growth has not matched tech-focused peers in Asia. “India’s nominal GDP growth has slowed, with no clear catalyst to return to the 12–13% levels of previous years,” he said.

Tirumalai highlighted valuation concerns as a key factor behind UBS’s cautious stance. “Historically, India traded at a 35–40% premium to other emerging markets. Even after a year of underperformance, it is still at a 60% plus premium,” he added. He also pointed out that India has yet to make a meaningful mark in the AI theme driving growth elsewhere.

Another factor weighing on the market is India’s active primary market, where a surge in IPOs has absorbed a large share of household investment flows. “Corporate demand for equity capital… is touching 25% of household flows, compared with around 10% before the pandemic,” Tirumalai said.

Despite these headwinds, UBS does not foresee a sharp decline in Indian stocks. “It would be very difficult for the Indian market to correct by more than 5%,” he said, describing the current phase as a “time correction.” Strong domestic participation continues to act as a buffer, making the market defensive against major declines. UBS also expects the Indian rupee to depreciate through the end of next year.