Mumbai — Indian equities may be poised for a rebound with increased foreign investment expected over the coming quarters, according to a new report from HSBC Global Investment Research. The firm said recent market trends suggest the period of underperformance is fading, creating room for Indian stocks to draw investors seeking alternatives to the global artificial intelligence-driven rally.
“We are overweight Indian equities from the Asia perspective, with an end-2026 index target for the Sensex at 94,000,” the report stated.
Indian equities have lagged broader Asian markets by roughly 30 percent over the past year. However, the report argues that the worst of this phase has passed. Herald van der Linde, CFA, Head of Equity Strategy for Asia Pacific, noted that India remains the largest underweight position in global emerging market portfolios, with only about one-fourth of tracked funds currently overweight on the country.
“India offers a hedge and diversification to those who feel uncomfortable with the ongoing AI rally. India is likely to be an outsized beneficiary of any additional money coming into the emerging markets space,” the report said.
The research suggests that any potential reduction in U.S. tariffs would serve as a major upside catalyst. Still, it cautioned that risks include delays in earnings recovery, continued concentration of global investment in AI-focused markets, and weakening domestic interest in equities.
HSBC analysts also noted that valuations are no longer as stretched as they appeared a year ago, with Indian markets now offering relative value compared to China. Earnings, they argue, have likely hit their low point, with a broader recovery anticipated by 2026.
The report highlights banks as a sector that weighed heavily on earnings this year, but it expects margins to improve as deposits are refinanced. The technology sector is projected to benefit from rising global demand, while consumer-focused industries, including automakers, may gain from lower inflation, reduced interest rates, and targeted tax changes such as GST adjustments. (Source: IANS)
