UBS India reports that automobile demand has significantly outpaced analyst expectations since last year's GST cuts, with two-wheelers and passenger cars tracking 22% year-to-date growth between April and September. As per CNBC TV18, Pramod Kumar, India Auto Analyst at UBS India, notes that the industry now expects high single-digit growth cumulatively through the festive months, measured against a base that already includes last year's GST cuts. Kumar explained that forecasts for demand to cool off by the festive season, and later by March, had repeatedly proven wrong, with the demand momentum surprising everyone in the industry since the GST cut implementation in September last year. However, Kumar flagged one key risk: rising input costs from a pickup in crude oil prices pushing up the broader commodity basket used in vehicle manufacturing, which could squeeze profit margins even if sales numbers stay healthy.
Within the automotive sector, UBS India has a clear preference hierarchy for different segments. Kumar stated that commercial vehicles as amongst the OEMs is the preferred space, describing it as a segment that global markets typically value closer to capital goods stocks but trades at a discount in India despite a duopoly structure, strong cash flow and limited disruption risk from new technology or regulation. Medium and heavy commercial vehicles are up close to 25%, significantly outperforming passenger cars. Two-wheelers rank second in UBS's preference order, with Kumar noting that electric vehicles, scooters and premium motorcycles have led gains in this segment, a shift he described using the shorthand electrification, premiumisation, scooterisation. Passenger cars rank last, weighed down by intensifying competition, technological disruption and the prospect of new entrants, including Chinese original equipment manufacturers entering the Indian market.
UBS India is witnessing a significant surge in merger and acquisition activity across the IT services sector as enterprise artificial intelligence projects transition from pilot phases to actual production. Aditya Chandrasekhar, India IT Services & Internet Analyst at UBS India, reports that AI projects for enterprises have been in a pilot or experimentation phase so far, and they're really ramping up to production now. As per CNBC TV18, this shift is driving increased demand for IT services firms to provide implementation and support capabilities. The brokerage notes that even some traditional IT companies that have historically avoided mergers and acquisitions are now looking at deals to strengthen their AI capabilities, with M&A activity across the board becoming more prevalent.
UBS India maintains a cautious stance on India's equity markets, with Sunil Tirumalai, Head of Emerging Markets Asia Equity Strategy at UBS, stating that India is not the market to chase right now, at least not for the next year or so. Speaking on the sidelines of the UBS India Conference 2026, Tirumalai explained that while India's growth remains strong at around 7%, the problem lies in other emerging markets having an even better run. As reported by CNBC TV18, he noted that China's exports are firing, commodity exporters like South Africa and Brazil are riding higher prices, and Korea and Taiwan are sitting on top of the AI semiconductor boom. The numbers support this caution, with emerging markets as a whole tracking 25-26% earnings growth over the next two years, while India sits at 16-17% and trades at a premium valuation.
Despite the cautious outlook, UBS continues to favor financials as the key sector to watch, with Tirumalai noting that the entire financial services space looks interesting right now, within that, banks stand out as fairly cheap on valuations, and credit growth is starting to pick up. As reported by CNBC TV18, he emphasized that banks look cheap, credit growth is finally picking up on the topline after a long dry spell, and UBS isn't seeing any near-term asset quality worries. The Nifty Financial Services Index and Nifty Private Bank Index have maintained stable to improving relative strength readings, with Kumar noting that NBFCs are agile and use technology well, displaying aggression, growth and tech adoption. UBS also sees opportunities in life insurance, with Tirumalai's team believing it's been beaten down aggressively due to regulatory worries and is now at the end of sufficient underperformance.
In the electric two-wheeler market, UBS India observes a significant shift in market dynamics that favors traditional manufacturers. Kumar noted that three years ago, startups controlled more than 60% of the electric two-wheeler market, but that combined share has since fallen to around 20%. The legacy OEMs have doubled their market share, now holding roughly 60% of the market, up from about 30% three years ago. As reported by CNBC TV18, Kumar explained that electric two-wheeler technology is not difficult for established manufacturers to replicate, and that legacy players are actively gaining ground rather than ceding the category. He added that market share rankings in the space are likely to keep shifting, with opportunities existing across both incumbent and startup names for companies well positioned on electrification.
The Nifty's struggle to reclaim 24,000 is beginning to signal a potential correction phase rather than a temporary pause, according to Geojit Investments chief market strategist Anand James. As reported by The Economic Times, the benchmark index has closed below the rising trendline that had supported prices since April 2026, with 23,800 emerging as firm near-term support. James emphasized that any recovery attempt will require the Nifty to push above 24,215 for the market structure to turn constructive, warning that failure to do so could trigger a deeper correction toward 23,260. Kumar's analysis suggests the move from 28,000 to 30,000 on the index remains achievable over the next 15 months, with the current correction phase creating opportunities for selective buying.
