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Investing.com-- India’s financial and consumer sectors are poised for growth, driven by easing monetary policy and a rural demand recovery, UBS analysts said in a note.
UBS expects the Reserve Bank of India (NSE:BOI) (RBI) to cut rates by another 75 basis points this fiscal year, supported by benign inflation averaging 4.0%.
Analysts highlighted financials as a top pick, with large private banks trading below historical valuations. UBS forecasts mid-single-digit earnings growth for FY26, accelerating in FY27 as loan growth rebounds.
"With rate cuts underway, improving liquidity, and easing regulations, we believe tail risks for the banking sector have decreased substantially," analysts wrote.
Non-banking financial companies (NBFCs) are also expected to benefit from improved liquidity, according to UBS.
In the consumer sector, UBS cites a revival in rural demand and softening commodity prices as tailwinds for fast-moving consumer goods (FMCG) companies.
Automobiles and healthcare—particularly hospitals—are seen as steady performers, while IT services face uncertainty due to global tariff risks, according to UBS.
"The Indian economy remains sound, with US officials indicating the country could be among the first to seal a trade deal with the US," UBS said in a note.
India’s Nifty 50 index, up 10% since April, trades at 20x P/E, below its September 2024 peak, analysts noted.
"We continue to see upside ahead and toward year-end, especially as earnings growth accelerates," they added.