New Delhi [India], September 25 (ANI): Global brokerage HSBC has upgraded India to “overweight” from “neutral”, citing improving macroeconomic conditions, attractive valuations and policy support that could boost consumption and corporate earnings.
According to HSBC’s Asia Equity Insights Quarterly Strategy Report released on Wednesday September 24, Indian equities have lagged emerging market peers over the past year due to a domestic slowdown and concerns over high US tariffs, but now looks attractive.
“India now appears attractive on a regional basis: we move to overweight from neutral,” noted the report.
HSBC now sees India as offering better value relative to other Asian markets and expects the Sensex to touch 85,130 by end 2025 and 94,000 by end-2026, implying a potential upside of 13.2 per cent from current levels.
“While earnings growth expectations can fall a little further, valuations are no longer a concern, government policy is becoming a positive factor for equities, and most foreign funds are lightly positioned. We think Indian equities now look attractive on a regional basis and upgrade the market to overweight (from neutral),” noted the report.
Domestic policies have turned more pro-growth, tax cuts should support consumption, while the central bank is easing. Valuations are no longer a major headwind, and foreign positioning in India remains light, creating a favourable backdrop says the report.
Despite persistent risks such as a slowdown in earnings growth and the drag from US tariffs, the report said these factors are now largely priced in. Less than 4 per cent of sales of BSE500 companies come from exports to the US, limiting the earnings impact of tariffs. Pharmaceuticals, a key export sector, is also currently exempt.
“Indeed, India faces some of the highest US tariff rates in the world. But most listed equities are domestic in nature and less than 4 per cent of sales for all BSE500 companies come via exports of goods to the US,” said the report.
The report highlights that inflation has softened sharply, allowing Reserve Bank of India (RBI) to cut rates and ease lending norms, while government measures like income tax cuts and the recent GST overhaul will revive consumption and boost demand.
The report says that although foreign funds have withdrawn a significant amount from Indian markets, domestic investors have remained resilient.
“Although foreign funds have withdrawn significant amounts from India in the last 12 months, a period in which the market has seriously underperformed, local investors have remained resilient”, noted the report.
Overall, HSBC’s Asia-wide outlook remains overweight on India, mainland China, Hong Kong and Indonesia, while staying underweight on Korea, Taiwan, Singapore, Japan and Thailand. (ANI)
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