UBS drops long-held bearish view on Indian market, downgrades Hong Kong

By John Cheng

  UBS Group AG is abandoning its long-held bearish view on Indian stocks, upgrading the market to neutral from underweight as it realigns its strategy given global trade uncertainties.  

The brokerage is becoming more optimistic on the South Asian market amid a growing preference for defensive and domestically-oriented shares, strategists including Sunil Tirumalai wrote in a note dated Thursday. 

“While valuations still look expensive relative to ordinary fundamental performance of companies, India screens as defensive amidst trade uncertainty given its domestic focused economy, while benefiting from lower crude oil prices,” the analysts wrote.

The upgrade comes as global investors refocus on Indian assets as a relative safe haven in the wake of US President Donald Trump’s tariff war, with local stock benchmarks quickly recouping losses since the April 2 announcement of levies. Indian banks’ willingness to cut deposit rates despite weak deposit growth and the potential of government support for consumption have been factors for the upgrade, UBS analysts added. 

Meanwhile, UBS downgraded Hong Kong stocks to neutral from overweight as the tariff risk could dampen sentiment given the market’s relatively high trade dependence and index exposure to US revenues. 

The brokerage also upgraded Indonesia to overweight from neutral, given its domestic and defensive qualities “with valuations now close to Covid lows” and potential support from state-owned funds. 

To be sure, the strategists haven’t gone overweight in India as stock fundamentals “are still lacklustre” and it’s unclear whether government focus is returning to growth or investments anytime soon. It’s also “hard to conclude India is a winner in supply chain shifts,” they wrote, adding that China still looks more attractive than India from a risk-reward perspective. 

Tirumalai’s team has held an underweight rating on India since 2022. In April last year, they upgraded Chinese stocks to overweight, citing a promising earnings outlook and potentially higher participation by domestic investors. 

©2025 Bloomberg L.P.