Nomura ups rating on Indian equities to overweight in Asia

“India’s recent budget aims to prioritise fiscal spending/growth over medium-term fiscal commitment – thus implying a positive medium-term growth outlook, while the Covid-19 situation appears to be largely under control,” Nomura said.

While there are risks to watch in the second half of 2021 such as Covid/inflation resurgence, policy normalisation, US Federal Reserve-driven ‘taper-tantrum’, higher oil/commodity prices and policy execution, the research and brokerage house says, any sustained weakness will likely provide an opportunity to increase India exposure.

Nomura also caution against the expensive valuation the market is trading at. From March 2020 lows, the S&P BSE Sensex and the Nifty50 have mostly been on a secular uptrend – rising over 90 per cent each since then. Economic recovery and improvement in corporate earnings over the past few quarters have also surprised analysts.

"In the near term, India equities may remain well supported and investor interest will remain high. The consensus earnings expectation could see further revision before higher commodity prices start to affect margins. Continue to like companies from sectors that are going to benefit from the Covid-19 recovery" said an expert.