FIIs return to India: Early signs of a real recovery finally here: Gautam Chhaochharia, UBS

Group 1: Market Outlook - Global investors are returning to explore bottom-up stock opportunities after 4-5 years of being on the sidelines, indicating a shift in foreign investor behavior [2][18] - India's valuations remain elevated, particularly in the autos, consumption, and industrial sectors, but pressure is easing as global markets correct and corporate earnings stabilize [2][18] - The Nifty's latest quarter showed 8-10% PAT growth, but margins remain soft; markets are expected to break out of consolidation only if earnings shift toward higher double-digit growth [6][18] Group 2: Sector Analysis - UBS remains positive on the BFSI sector, recommending a stock-specific approach rather than a PSU versus private lens; both private and PSU banks are seen as strong, with growth differentiation being key [8][18] - In the consumption sector, segments like jewellery and quick commerce are attractive, while some FMCG and auto names appear stretched [10][18] - The power and energy profit pool expansion is underestimated, with private corporate capex steady as a share of GDP, although a repeat of the 2003-07 boom is not expected [11][18] Group 3: Emerging Trends - Quick commerce is viewed as a high-growth area, with improving unit economics and faster dark-store expansion even in smaller markets [13][18] - Traditional auto manufacturers with limited EV exposure may underperform, and caution is advised in this sector [14][18] - India is not yet part of the global AI boom due to a lack of large capex-heavy AI infrastructure players; focus should be on how IT services adapt and which sectors adopt AI fastest [15][18] Group 4: IPO Market - Global investors are cautious but not worried about the exuberance in India's IPO market, viewing it as a small slice of their exposure; participation in IPOs does not significantly impact core investment strategies [16][18] - Despite global uncertainties and high valuations, India's narrative remains strong and diversified, with a bottom-up market approach being more appealing than a concentrated top-down strategy [16][18]