>Correction = Buying opportunity (UBS)

■ Deploying Cash; Turn +ve on Auto, Pharma & Telecom; Turn –ve on IT
We believe that the recent Indian equity market correction presents an excellent buying opportunity. We increase our exposure to autos and telecom & introduce an overweight on pharma. We reduce exposure to IT services (refer to our report ‘Offshoring 3.0 -realities of a changed world’ dated 30Oct09). While we cut banks to neutral, we continue to maintain off-benchmark positive view on PSU banks.

■ Add Ambuja, DRL, Hindalco, M&M; Remove ACC, JSW Steel, Unitech
Within autos we increase exposure to Maruti and M&M to our portfolio. We add M&M as we believe concerns regarding impact of a weaker monsoon on company sales are overdone. We add Hindalco as we expect the domestic business to gain on higher aluminium price expectations. We add Reddy's to the portfolio as we believe consensus upgrades are likely given greater visibility on US drug launches. We replace ACC with Ambuja as Ambuja is least exposed to South (maximum pricing pressure) & Central India. We remove JSW Steel as rising raw material prices could impact margin outlook. We add Tata Steel with a neutral weight. We remove Unitech as we do not expect near term catalysts in the stock.

■ Maintain positive stance on Indian stocks in the medium to long term
As we highlighted in our report “India-the next Asian tiger”, we are bullish on India in the long term given: 1) UBS real GDP growth expectation of 8-9% for next 10-20 years; 2) Attractive demographics with rapidly falling dependency ratio; 3) Low penetration of products & services 4) Stable government. Our key overweight stocks: Bharti Airtel, Maruti, M&M, Bank of Baroda, PNB, Hindalco, Reddy's, IndiaBulls Real Estate, Tata Power, TCS, Ambuja, Union Bank.

To read the full report: INDIA STRATEGY