"Our Nifty target for end-2014 is 8,000. There could be an upside to this target based on how policy-making evolves over next few months, which could flow through to earnings estimates and multiples higher than average," UBS said in its India market strategy report here.
"We remain bullish on Indian equities. While markets can always take a breather as investors await actual reforms as well as real impact on economy, as seen in Japan/China, we think any such dips could prove to be a buying opportunity.
"Unlike the last three years, we expect earnings growth estimates of 15-16 per cent to be met or potentially beaten and yet valuations remain reasonable, near fair valuation. We believe investors will be willing to give a premium for growth hope and also look beyond FY15 earnings estimates," the report said.
The report says the unprecedented mandate for the Modi-led National Democratic Alliance could imply a strong and stable government, paving the way for more sensible policy-making, which were arguably constrained earlier by coalition politics.
"Expectations around Modi's reform/development agenda imply India's growth story hope will remain strong, at least in the next few months," the report said.
According to the report: "India's reform story will play out at multiple levels, with different time frames. In the near term, inflation and fiscal consolidation are likely to be focus areas. The Union Budget in early July and potential diesel, gas and urea price hikes will provide some direction," the report said.
UBS said the Modi government's announcements on FDI liberalisation, tax reforms, insurance and pension bills should begin shortly. For the longer term, the focus areas will be coal, power, tourism, agriculture, urbanisation and skill development.
UBS expects that tougher reforms in land and labour may take some time.
The goods and services tax is said to have been taken up with priority, with the finance minister likely to meet his state counterparts soon to discuss their concerns and implementation time line.
UBS said it is overweight on financials, oil & gas, power, infra and industrials, cement, telcos, media and small and midcaps; underweight on consumption (staples, discretionary including urban), auto and pharma, and neutral on auto four-wheeler, metals & mining, and IT services.