Rising oil prices pose a risk to India's macroeconomy and markets, according to UBS.
"There is a clear relationship between India's relative performance to emerging markets and oil prices. Yes, I am nervous about that," Bhanu Baweja, head of UBS' Emerging Market Cross Asset Strategy told BloombergQuint in an interview.
Baweja finds India's stock valuations to be expensive, which is why India does not feature on UBS' top emerging market trades for 2018. He prefers Brazil and North Asia instead.
The valuation-reality gap is particularly wide in India.Bhanu Baweja, Head - Emerging Market Cross Asset Strategy, UBS
Earnings will have to "grow into" current valuations before he changes his view on India.
Baweja is long on Indian bonds but expects the rupee to weaken further against the dollar.
The Indian rupee is uncompetitive. India does not have strong export competitiveness.Bhanu Baweja, Head - Emerging Market Cross Asset Strategy, UBS
This even as UBS does not expect the dollar to get stronger against major currencies.
Watch the full interview here.