The bank says valuations are still high, foreign mutual funds are still 'very overweight' on Indian shares.
The domestic currency had lost 49 paise to close at a three-month low of 60.55 on Thursday on capital outflows after the US Fed trimmed its monthly bond buying programme by another $10 billion.
The Bombay Stock Exchange has resumed trading after three hours on Thursday.
n New York market, the dollar posted second-quarter losses against nearly all major rivals yesterday, with the exception of the euro.
These sectors have underperformed the wider market over the past year and are seen having far more upside potential if the economy picks up thanks to Modi's reformist agenda.
The investment bank also says no ministries were merged even as some ministers were given more than one portfolio.
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The benchmark has gained 2 per cent this week on continued hopes the incoming Narendra Modi government would unveil substantial economic reforms.
The moves by the RBI, announced late on Wednesday, should increase supplies of gold and brighten the earnings outlook for jewellery makers after the government took tough measures to curb imports last year, analysts said.
Tata Motors is trading at 8.32 times 12-month forward PE, just marginally away from 8.31 times for Sesa Sterlite, currently the cheapest in the 30-member Sensex.
With the economy growing at its slowest rate in a decade, India's banking system is facing rising levels of stressed loans, with $100 billion, or about 10 percent of the total, categorised as bad or restructured.
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UBS added that its strategists are positively surprised by the scope and tone of the Plenum document.
The investment bank adds that company's September-quarter earnings came in line with consensus estimates.
The declines also tracked the Indian rupee, which fell to a record low as central bank measures to tighten capital outflows and curb gold imports were seen as unlikely to prop up the currency and could even spark further selling if they spook foreign investors.
Hindustan Unilever shares were up 3.7 per cent at 9.24 am after earlier hitting an all-time high of Rs 632.
Wage hikes and rupee depreciation may affect the business.
FIIs have been strong buyers of shares since last year until a recent streak of selling.
DLF, which builds homes, offices and shopping malls, has lost about 61 per cent of its value since listing on the stock exchange in 2007, underperforming the wider market.
The company stock ended up 4.49 per cent.
In a landmark judgment that has the potential to change the direction of India's pharmaceutical business, the Supreme Court said on Monday that the drug failed to qualify for a patent according to Indian law.
The buyer received poor investor response to the pricing of the share sale.
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