Credit Suisse has upgraded Indian equities to 'overweight' from 'market weight'. Dan Fineman, co-head of equity strategy for the Asia Pacific region at Credit Suisse, shared the rationale behind the upgrade.

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"India may be a relative outperformer rather than producing a strong positive return," Fineman said in an interview with CNBC-TV18.

“We are quite cautious on the region as a whole for the second half of the year. Valuations for the region as a whole are no longer cheap as they were,” he added.

“India though has some appealing features and I feel pretty confident it will outperform at least on the downside and might produce some absolute positive returns.”

According to him, valuations for India have become a lot more attractive.

“India tends to outperform in times of falling global interest rates and global monetary easing especially with the latest escalation of the trade war we probably will be seeing continued downward pressure on rates and easing from global central banks,” added Fineman.

Talking about the renminbi, he said, “I do not want to give a hard forecast but I will note that our economic team has calculated that if China were to try to offset all of the damage from the tariffs which Trump might be imposing in September on the remaining USD 300 billion worth of Chinese exports, the renminbi would have to go beyond 7.20/USD to 7.25/USD.”

About the MSCI India index, Fineman said, “We have an index target for the region as a whole of 2 percent for the second half of the year that was said before the latest escalation of the trade war; there is downside risk to that forecast.”

“India should do a bit better than the region as a whole. I do not think we can expect double-digit returns by any means, it would be too difficult of an environment unless we have some positive outcome on the trade war. We are looking more at something in the low single digits or mid-single digits,” Fineman added.