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Informist, Monday, Nov. 9, 2026

 

--CNBC-TV18:HSBC ups Indian equities to overweight from neutral on Q2 results 

 

MUMBAI – HSBC Global Investment Research has upgraded Indian equities to "overweight" from "neutral" citing moderating valuations, resilient corporate earnings despite higher energy costs, and the country's significant underperformance to other emerging markets over the past two years. Meanwhile, the brokerage downgraded China to "neutral" from "overweight" as weak consumer confidence, property market pressures, and softer domestic investment continue to weigh on the country's growth.

 

India offers diversification and low volatility in Asian markets dominated by artificial intelligence stocks, HSBC said. While rising oil prices and El Nino remain key risks, these are unlikely to materially weaken the overall sentiment, the brokerage noted. 

 

Indian equities have materially underperformed the broader Asian markets over the past two years, weighed down by a combination of stretched valuations, investor rotation into artificial intelligence stocks, higher crude oil prices, and broader macroeconomic uncertainty, the brokerage said. Despite the weak global backdrop, domestic activity has absorbed the macro pressures of higher crude oil prices and interest rates, much better than expected. 

 

Credit growth has been particularly strong, rising 21% on year in October, with broad-based momentum across segments. Meanwhile, deposit growth also accelerated to over 17%, with mobilisation of Foreign Currency Non-Resident Bank deposits improving system liquidity. Going forward, the brokerage expects credit growth to remain strong. It increased the 2026-27 (Apr-Mar) loan
on-year growth estimate to 18% from 14% estimated earlier. 

 

The resilience of the domestic economy is reflected in goods and services tax collections and strong vehicle demand, HSBC said. Rural demand has also held up reasonably well so far, supported partially by strong execution of government capital expenditure.

 

However, inflation and El Nino risks keep on building. The brokerage expects some weakness in economic growth in the coming months amid higher energy prices and the risks of EL Nino. Following a 25-basis-point rate hike in October, HSBC now expects the Reserve Bank of India to deliver another 50 bps hike in December. Even so, HSBC expects earnings resilience, currency support, and comfortable valuations to push the domestic equity market higher.

 

In terms of earnings trajectory, India has clearly improved from high-single-digit growth to low-teen growth over the past four quarters, HSBC said. While the earnings growth is still lower compared to other markets such as Taiwan or Korea, the reliance, visibility and stability in the numbers offers comfort, it said. While the brokerage expects modest cuts in earnings in certain sectors over the coming months due to some weakness in growth and margin pressure, these impacts are not expected to be significant, it said. It sees strong earnings in sectors linked to manufacturing, renewables, metals and mining, and lenders. On the other hand, rural and agriculture-linked segments, such as tractors, could stay uneven over the next few quarters, HSBC noted. 

 

Some of the pessimism in Indian equities can also be attributed to a sharp depreciation in the rupee in the last couple of years that has weighed heavily on foreign demand. Even though HSBC expects the rupee to remain under pressure until crude oil prices fall substantially, the recent measures by RBI to manage rupee depreciation along with healthy foreign exchange reserves are expected to offer some near-term relief. 

 

On the recent buzz around a potential removal of a long-term capital gains tax for foreign investors in the upcoming union budget, the brokerage said removing the tax could improve India's appeal to foreign investors over time. However, tax relief alone is unlikely to determine the direction of foreign fund flows. Earnings growth, valuations, currency stability and the broader macro backdrop remain important drivers. 

 

HSBC prefers high-quality growth names in sectors such as financial services, automobiles, retail, services, and hospitals, where demand remains firm. Meanwhile, information technology, consumer staples, oil and gas, utilities, and Pharma are the least preferred sectors.  End

 

Reported by Arya S. Biju

Edited by Shubhayan Bhattacharya

 

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