Gautam Chhaochharia, MD and head of India research at UBS Securities, spoke to CNBC-TV18 about the current trends in stocks market and shared outlook.

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“I still think the risk-reward is unattractive in the market. From a global perspective, our house-view is still constructive in the sense that we don’t see any material downside though our economists globally do highlight that the probability of an escalation in the global trade was has gone up. it is still not a base case that there will be a full-blown trade war but an escalation scenario has definitely gone up in which case, the downside for US, European equities could be meaningful, for Asia equities, it is generally now getting priced in and India specifically has outperformed a lot in the context of this outlook also because of the strong local flows," said Chhaochharia.

"So fundamental wise, India long-term story remains intact so there is no reason to argue that India will necessarily have a bear market over the next two-three years. However, having said that the current level of valuations don’t leave much room for error or any such risk based sell-off,” he said.

Talking about the market trend, Chhaochharia said, “We see more downside for the market than upside both for the midcaps as a whole and for broader markets. Any portfolio positioning has to be in keeping that in mind. So our portfolio positioning is overweight IT services, overweight private banks including the corporate lenders, underweight industrials, infrastructure and midcaps and then be much more stock specific. We also like a lot of the auto, four-wheelers and two-wheelers, not all of them, it is a very disbursed basket. Similarly, in consumption we have very selective individual names where you have a lot more visibility and comfort on earnings surprising positively over the next one year. In general, that basket is expensive,” he added.

“Our top-down view for broader market’s macro is that the growth recovery which we are seeing is not as high or as per the market’s optimistic expectations are. A lot of it is driven by low base effect rather than a beginning of a new big growth up cycle per se,” said Chhaochharia.