As the Lok Sabha Election 2024 going on a flip side with BJP not getting the expected numbers, UBS has released a report saying the valuations are expensive, and remain ‘underweight’ on India.
The report further said that it seems like BJP may not cross 272-mark on its own, and coalition government to return after 10 years in India.
Amid this situation, the UBS sees three emerging scenarios.
The first scenario that the UBS highlighted was that the Modi government will come with alliance, but may not function smoothly.
“Narendra Modi will come back as the Prime Minister, but carrying along the alliance partners. The government may not function as smooth as the last 10 years when PM office had a strong control over all the government machinery,” it said.
The second scenario it highlighted is that the NDA will form the government but with a new Prime Minister other than Narendra Modi.
Third scenario it mentioned is that some of the key alliance partners of BJP switch sides and the opposition INDIA alliance comes to power.
“This could lead to meaningful changes in trajectory of govt policy,” it added.
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UBS goes on to question the Indian market valuations, saying that this was not an election outcome that the current market valuations were set up for. “India valuations have been expensive for ordinary corporate earnings growth.
The brokerage also went on to say that one of the arguments behind India’s rich valuations could have been the political stability / policy certainty that a strong government gave but now some of those assumptions could come under question.
Therefore, UBS remains Underweight on India in the Emerging Market context.
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(This is a developing story)
