Foreign institutional investors trimming their overweight positioning on India, says UBS

MUMBAI: UBS, a Switzerland based investment house said that some foreign institutional investors (FIIs) are trimming their overweight positioning on India. The investment house which met nearly 100 investors from US, Europe, and Asia added that most of the FIIs maintain their overweight positioning on India.

UBS said some foreign investors still have expectations of sharp economic recovery in second half of this fiscal (FY16). Investors also expressed their mild disappointment with the Modi government on pace of economic reforms, and the recent retrospective tax issue.

The investment house said Indian markets after recent correction reflects readjustment of growth expectations, and also makes risk-reward more reasonable. There could be further reduction in earnings estimates, Nifty earnings growth forecasts stands at 10% and 18% for FY16 and FY17 respectively, against street forecasts of 16% and 20%.

Among the sectors foreign investors showed mixed response to banks that are likely to benefit from lower interest rates. HDFC Bank, SBI and LIC Housing were the most preferred stocks.

UBS said foreign investors showed resistance to pharma sector given the sharp rerating over past few months. Sun Pharma remain were the most favoured stock.

Some foreign investors see valuations reasonable in IT space post recent sell-off as the risk-reward ratio has improved.

Foreign investors had consensus underweight view on rural focused sectors such as auto two-wheelers, and specific consumer staples. Hero MotoCorp and Hindustan Unilever remain least preferred stocks.