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Informist, Thursday, Dec. 11, 2025

 

MUMBAI – Supported by lower inflation, tax reforms, and easier monetary policy, HSBC Global believes Indian equities are set for a stronger position in 2026. The broking firm, which is "overweight" on India, retained its 2026-end target of 94000 points for the Sensex, an upside of 11% from the spot level. 

 

"The worst of the earnings downgrades seems to be behind us and recent results have boosted our confidence in the growth outlook," HSBC said. It said valuations were "more reasonable", with India's premium over other emerging markets back to normal levels. HSBC also anticipates more foreign flows to India as funds are looking to diversify beyond artificial intelligence-focused sectors in Asia.

 

The brokerage sees a slower growth recovery, enthusiasm around the artificial intelligence theme elsewhere in Asia, rising geopolitical tensions, and currency swings as four major risks to its forecasts. "A trade deal with the US would be positive, but, in our view, it is not essential for the return of foreign investors," the broking firm said. 

 

Among sectors, HSBC is keen on those driven by domestic demand and strong growth prospects. The brokerage is "overweight" on sectors such as banks and financial services, consumer dicretionary, which includes automobile, telecommunication, and energy.   

 

"Financials stand out for their steady growth and because they are likely to attract foreign investors," it said. Consumer discretionary companies, including automobile makers, should benefit from lower rates. It expects the telecom companies to enjoy strong pricing power and limited competition. The brokerage also favours companies belonging to energy sector as they are "well-placed", given softer oil prices. "We favour large-cap stocks and find selective opportunities among mid-cap stocks," HSBC said.

 

HSBC is "neutral" on the technology sector as it anticipates a recovery in demand next year and is cautious on the sector's significant external dependencies and medium-term challenges. However, current valuations suggest limited downside risk. The broking firm is "neutral" on consumer staples. It expects the disruptions due to the impact of the goods and services tax cuts on channel inventories to be absorbed by Oct-Dec, with management teams expressing optimism about the positive influence of lower rates on consumption and demand.

 

The broking firm said real estate was a high beta sector and tends to outperform during a market recovery. However, the real estate sector, for which the brokerage has a "neutral" rating and recommends selective exposure, is in the mid-cycle phase. "The demand is skewed towards large-sized and premium apartments, and the mass segment faces affordability concerns," it said. But the brokerage still sees good balance sheet and limited unsold inventory.

 

HSBC is cautious and selective within industrial companies and is "underweight" on the sector. Overall, private investment is still on the sidelines, limited to certain pockets such as renewables, data centres and electronics. Public capex has been strong and upfront so far this year and should moderate in the coming months as the government sticks to its annual fiscal consolidation path.

 

The brokerage is "underweight" on the healthcare sector, which includes pharmaceutical and healthcare companies. "Valuations are not overly attractive, and the sector is quite well-owned by domestic funds," HSBC said. Meanwhile, the market is looking for a better understanding of earnings drivers for pharmaceuticals companies after the loss of sales from large products in the US such as gRevlimid, the brokerage said. 

 

HSBC is "underweight" on basic industries and sees better risk-reward opportunities elsewhere. "High global linkages and intense competition from foreign companies across many categories make us cautious," the broking firm said. Many industries within the sector face issues like overcapacity and intense competition from China, the broking firm said. HSBC favours aluminium among commodities, given the cap in China's capacity and steady global demand. "We also have a positive view on silver and expect prices to remain firm, given increasing investor demand," the brokerage said. 

 

Meanwhile, HSBC is "underweight" on the utilities sector as it expects the rise in power demand to trail India's GDP growth. "We expect renewable power to account for more than 80% of new capacity additions." While issues on land acquisition and the lack of transmission capacity are constraining new capacity additions, higher battery adoption could resolve a lot of issues on supply management and pricing, the broking firm said. It expects the recent fall in battery prices to support the commissioning of new renewable energy capacity.

 

Among stocks, the brokerage focusses on three main cases with top 10 picks, the first being "stocks riding industry tailwinds" which includes Kalyan Jewellers Ltd., Mahindra & Mahindra Ltd., State Bank of India, and ICICI Lombard General Insurance Co. Ltd. The brokerage also favours stocks with attractive risk-reward, including Infosys Ltd., Phoenix Mills Ltd., and Marico Ltd. The other top choices in sectors HSBC is less favourable on are Hindalco Industries Ltd., Apollo Hospitals Enterprise Ltd., and Adani Ports and Special Economic Zone Ltd.  End

 

Reported by Gopika Balasubramanium

Edited by Avishek Dutta

 

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