UBS moved Indian equities from an "Attractive" to a "Neutral" rating in a recent note, attributing the change to India’s dependence on imported energy and the heightened risk of continued oil-price pressure as tensions in the Middle East entered a fourth week.
The firm’s Chief Investment Office pointed out that MSCI India is trading at 19.9x forward earnings, a multiple above prior crisis troughs and one that, according to UBS, leaves scope for further downside should market conditions deteriorate.
UBS underlined the economy’s exposure to energy market shocks: "India’s heavy reliance on imported energy makes it particularly vulnerable to supply disruptions and price spikes, with equities showing one of the strongest negative correlations to oil in over two decades," the note said. The brokerage warned that sustained elevated energy costs could widen India’s current account deficit and exert near-term pressure on corporate earnings.
The brokerage also described broader emerging market moves as the Middle East conflict intensified. The MSCI Emerging Markets index has fallen as much as 10% from its peak during the escalation, and UBS singled out large energy importers such as China, India, and South Korea as among the most exposed to this shock.
On outlooks and targets, UBS revised its 2026 emerging markets earnings-per-share growth forecast to 27% and set a December 2026 MSCI EM target of 1,630. That target implies low- to mid-teens upside from the March 25 level of 1,470, with an interim June 2026 target of 1,550. The firm also modelled scenario outcomes: in a downside scenario the December 2026 target falls to 1,200, while in an upside scenario - driven by central bank easing, targeted Chinese fiscal support, and trade de-escalation - the target rises to 1,880.
Despite the downgrade for India, UBS kept a broadly constructive view on emerging market equities. The bank retained its Most Attractive rating on mainland China’s technology sector and Attractive ratings for mainland China, Brazil, Indonesia, Malaysia, and South Korea. Following the revision, India joins Taiwan, Thailand, the Philippines, Mexico, and South Africa in the Neutral category.
UBS noted country-specific drivers behind its ratings. South Korea, upgraded to Attractive earlier in March, is expected to benefit from a memory upcycle that the bank said is likely to extend into 2027, with forecasts pointing to one of the largest supply shortages on record for both DRAM and NAND. For China the brokerage cited factors that reduce vulnerability to oil shocks - lower direct oil reliance, the presence of strategic reserves, regulated fuel pricing, and greater policy flexibility.
Brazil was described as supported by local rate cuts, though UBS flagged the October 2026 general election as a source of potential near-term volatility. The note concluded by saying UBS continues to favour diversified exposure to emerging markets through the MSCI Emerging Markets benchmark, focusing allocations on China, China tech, South Korea, Brazil, Indonesia, and Malaysia.
Contextual note: The brokerage’s actions and targets reflect its assessment of energy-driven risk, valuation levels, and differentiated policy and structural positions across emerging markets.