UBS downgrades Indian shares

UBS downgrades Indian shares Global financial services major, UBS has announced its decision to downgrade Indian shares to "neutral" from "overweight" and pointed out that the country might see pressure from inflation and thus the authorities might not be in a favor of an aggressive rate cut.

UBS said that China is a relatively better investment destination as it is set to benefit from expected policy easing, a stable economy as well as better valuations for investors. On the other hand, it believes that the inflation might not fall significantly in the country and this there is not much possibility of an aggressive rate cut.

The bank said in a report that, "We continue to think the best theme in the region is to be tilted towards policy easing. Our preference here is now China rather than India."

The global bank pointed out in the report that since the month of February, India has lost most of its relative gains for the year. However, the report also said that it does not believe that the valuations are higher in the country but there are issues with the liquidity situation.

RBI has reduced its key interest rates for the first time in three years in order to boost the slowing economic growth on Tuesday. The central bank announced 50 basis points cut in its policy repo rate to 8 per cent but pointed out that there is very little possibility for any further reduction in the rates.