FIIs return to India; early signs of a real recovery finally here: Gautam Chhaochharia, UBS

India may finally be entering a phase where growth expectations and investor sentiment align, according to Gautam Chhaochharia, Head of Global Markets, India at UBS. After years of foreign outflows and valuation concerns, Chhaochharia says both corporate commentary and global investor engagement indicate that India is witnessing “tangible early signs of recovery — not the usual second-half optimism.”

Speaking to ET Now after UBS’s flagship India conference, which saw record global participation, Chhaochharia highlighted three major themes shaping India’s market outlook.

Global investors returning after 4–5 years

UBS observed a shift in foreign investor behaviour: FIIs that had stayed on the sidelines for years are now exploring bottom-up stock opportunities again.


India’s valuations remain elevated — especially across autos, consumption and industrials — but pressure is easing as global markets correct and corporate earnings stabilize.

“It’s not that Indian valuations have turned attractive, but relative to global markets, the long-term growth story stands out,” Chhaochharia noted.

Earnings recovery: The key trigger for a breakout

The Nifty’s latest quarter showed 8–10% PAT growth, but margins remain soft. UBS believes markets will break out of their recent consolidation only if earnings shift toward higher double-digit growth.

What could drive this?

• Early signs of credit standards easing
• Improving credit growth as banks turn more aggressive
• Recent RBI and fiscal easing, which may take a few quarters to show up
• Strong financial system stability with NPLs no longer rising
• Financials alone — a heavyweight in the index — could significantly lift overall earnings if growth accelerates.

UBS remains positive across the BFSI basket, but recommends a stock-specific approach rather than a PSU vs private lens.

Sector Outlook: Where UBS sees opportunities

Financials: The biggest multi-quarter opportunity

Both private and PSU banks look strong, though growth differentiation will be key. Banks linked to capital markets activity could outperform.

Consumption: But selectively

Jewellery, quick commerce and segments with strong bottom-up innovation remain attractive. Some FMCG and auto names look stretched.

Capex: Power & defence leading the charge

UBS believes the market is underestimating the coming power and energy profit pool expansion — in both traditional and renewable segments.

Defence continues to be one of the strongest multi-year themes.

Private corporate capex is steady as a share of GDP, but UBS warns investors not to expect a repeat of the 2003–07 boom.

Quick commerce : A high-growth surprise

UBS remains bullish despite cash burn concerns, noting that unit economics are improving and dark-store expansion is faster than expected even in smaller markets.

Autos: Prefer EV & premium plays

Traditional auto names with limited EV exposure may underperform. UBS advises caution here.

Deep Tech & AI: India not in the core rally yet

With no large capex-heavy AI infrastructure players, India remains outside the global boom. UBS says the focus should remain on how IT services adapt and which Indian sectors adopt AI fastest.

IPO frenzy: Institutional investors stay cautious but not worried

Chhaochharia said global investors are aware of the exuberance in India’s IPO market, but it won’t materially impact their portfolios.

“For institutions, IPOs are a tiny slice of exposure. If they participate and get a pop, good. If not, it doesn’t impact core strategy.”

Outlook: Broad-based, bottom-up India story continues

Despite global uncertainties, tightening US monetary expectations and high valuations, UBS believes India’s narrative remains strong and diversified.

“India is more bottom-up than a Mag-7 style market. The breadth of opportunity is what excites global investors.”