Indian stocks are providing a good hedge in portfolios ahead of the U.S. presidential election, thanks to a domestically-oriented economy. The UBS Group AG’s wealth-management arm and State Street Global Markets, which are amongst firms that are recommending to opt for Indian shares even beyond the November 3 vote, as they the $2.1 trillion stock market to be relatively insulated from the election outcome and Sino-US trade tensions.

Daniel Gerard, State Street’s senior multi-asset strategist says, “Being overweight Indian equities may look like an unconventional choice given the extremely challenging spot India is in. Yet, there are several factors that differentiate it from the story driving China, Korea, and Taiwan - our favorite markets - including relative insulation from exports and trade impairment.”

As the coronavirus infection rates and economic reopening are further strengthening the case for a market that has been trading near record valuations. However, foreign investors have pumped $2.3 billion into Indian stocks in October, trouncing flows to other emerging Asian markets excluding China. This has helped the benchmark S&P BSE Sensex Index rank to reach among the top performers in the world. However, India’s domestic consumption-driven economy has been facing the biggest contraction among major emerging nations.

Although, the Indian economy is highlighting are showing positive signs of demand-side recovery at a time when daily new virus cases have been gradually deteriorating. Yet, the country remains to be the world’s second-largest virus hotspot. Moreover, loan demands for micro, small and medium-sized enterprises and a pause in interest-rate cuts as the inflation bode well for financial said Gerard.

For Adrian Zuercher, head of global asset allocation at UBS’ wealth-management arm, India is “mainly an earnings story” as a fall in input prices has aided corporate profits and margins are more resilient than expected. Earnings estimates for the Sensex index in the next 12 months have risen about 10 percent since a trough in July, beating the upward revisions in those for the regional benchmark MSCI Asia Pacific Index.

However, India is one of the Swiss bank’s most preferred markets in Asia despite the Sensex trading at 20.7 times forecast earnings, near a record high.

Gerard further says, “In recent months, attention on India as an alternate global manufacturing destination has increased. India has an immediate potential to benefit from its e-commerce industry growth.”

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