Here’s how BCA Research recommends approaching Indian stocks

Investing.com - Indian stocks are expensive and anticipated to sell off further, as the South Asian country grapples with persistent external headwinds and little policy support, according to analysts at BCA Research.

In a note, the strategists including Rajeeb Pramanik predicted that exports to the U.S. -- a key cog of the Indian economy -- will "materially slow," even if India and the U.S. manage to reach a deal to lower currently-heightened 50% American tariffs.

India’s "vaunted" service sector exports could encounter challenges as well, especially as the White House rolls out more restrictions on H-1B visas, which allow U.S. employers to hire foreign workers for specific jobs, the BCA analysts said.

Indian workers typically obtain roughly 70% of these visas, a trend which the BCA analysts said could widen India’s current account deficit and possibly weigh on the rupee.

Fiscal spending has also remained flat despite the government’s budgetary intentions laid out last February, while the monetary policy stance of the Reserve Bank of India -- the country’s central bank -- has been "rather tight," the analysts flagged.

The RBI’s "less than accommodative" policies have not helped to replenish lost liquidity in the Indian banking system, they argued, adding that this is "a bad omen for the economy and asset prices."

Against this backdrop, Indian stocks are tipped by BCA to drop in absolute terms. The analysts recommended that absolute-return investors, who aim to generate positive returns regardless of market conditions, "should steer clear" of Indian equities.

Dedicated emerging market and emerging Asian equity portfolios, however, should "close their underweight in this bourse by shifting" their allocations to "neutral," the analysts said.

"We are contemplating funding this upgrade of the Indian bourse by downgrading Taiwanese and probably Korean tech stocks," they noted.

You May Also Be Interested In

• Stripe’s OpenRouter deal signals a new race to control AI economics
• UBS says bull market has further to run
• North Korea dismisses US military drill cuts, denies Trump talks