Indian equities have not had a very pleasant start to 2023. The Nifty 50 is down nearly 6 percent as the first quarter of the calendar year is about to end.

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However, the recent underperformance has turned some brokerages constructive on the Indian market. Brokerage firm CLSA believes that this is a "contra buy time."

They said that the sentiment is so bearish that investors should add beta to the India portfolio. CLSA's own bull-bear index had reached 91 percent on the bearish side.

Barring few instances in 2008 and 2020 they have seen such bearish instances 10 times in the last 15 years, and 9 out of those 10 times, it has proved to be a good entry point into the market.

Hence, they are advising clients to add beta. The brokerage has made some changes to its India portfolio - adding Reliance Industries, Hindalco, and IndusInd Bank, but have exited names like Infosys and NTPC. All three additions have been major underperformers this year.

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Another brokerage who sees favourable risk-reward for Indian equities post the recent correction is Citi.

India has seen a bit of underperformance and valuations have turned attractive. The Citi note says that the valuations are now almost one standard deviation below the five-year mean, and that actually turns out to be a good risk-reward from an entry point of view.

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Citi's sentiment indicator has also turned positive for the first time since June last year, and is suggesting that it can give mid-teens returns over the next 12 months. The bearishness may result in a good entry point and a tactical pullback rally, according to Citi.

Citi has a Nifty 50 target of 18,500 for March 2024. They have marginally cut down their multiples to 17.5 times but are bullish from these levels.

Citi has also made additions to their India portfolio with the addition of InterGlobe Aviation and GAIL.

The bottom line is that brokerages are turning optimistic on Indian equities due to the extreme pessimism, and the recent underperformance.

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(Edited by : Hormaz Fatakia)