"Top-down, we forecast Nifty earnings growth will recover from 9 per cent in fiscal 2018 to 13 per cent in 2019, but driven largely by financials," the brokerage said in a report on Tuesday.
"However, earnings growth is likely to disappoint against consensus forecast of 22 per cent growth for fiscal 2019, implying a 10 per cent cut," it added.
Accordingly, the brokerage estimates "no returns from the Nifty in 2018" and has set the index target at 10,500 for this December.
Besides, UBS also said the economy is likely to recover as it expects GDP to grow from 6.6 per cent in fiscal 2018 to 7.4 per cent in fiscal 2019.
However, the report noted that a sharp earnings recovery, with continued robust macro stability appears priced in by the markets.
"A sharp earnings recovery appears priced in. The markets are already close to our 2018 target, given optimistic fiscal 2019 consensus earnings expectations, which build in a strong growth recovery," the report said, adding "alternately, if we factor in realistic growth, the markets are trading at 2-year forward earnings".
The brokerage major also noted that despite its "muted market view", the country remains a stock picker's market, more so in this calendar year.
"We are overweight on private banks, property, oil and gas, telecom, IT services, and auto parts," it said adding it is underweight on cement and industrials/infrastructure.
UBS' view on the markets is contrary to other global and domestic brokerages. Deutsche bank has estimated the benchmark index to hit 11,500 levels, while Kotak Securities also sees Nifty at 11,600 by December on back of strong economic and earnings recovery.
The benchmark 50-stock index closed at fresh high of 10,637 level on Tuesday.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)