HSBC upgrades India to ‘overweight’

Indian equities are set to be in a stronger position in 2026 on the back of lower inflation, tax reforms, and an easier monetary policy, a HSBC Global Research report stated on Thursday, putting India’s outlook as ‘overweight’ from the Asia region.

Additionally, the global financial research firm maintained its previous target for Sensex at 94,000 for the upcoming year. “We are overweight India in an Asia context; our unchanged Sensex end-2026 target is 94,000, up 11 per cent from current levels,” the HSBC report said.

HSBC, in the report, noted that consensus forecasts point to 10 per cent growth in FY26 and 16 per cent in FY27 (14 per cent for large caps). “The worst of the earnings downgrades seems to be behind us, and recent results have boosted our confidence in the growth outlook,” it highlighted.

Valuations are now more reasonable, with India’s premium over other emerging markets back to normal levels. “We also anticipate more foreign flows as funds look to diversify beyond AI-focused sectors in Asia,” the firm noted.

Sectors including autos should benefit from lower rates, while telecoms enjoy strong pricing power and limited competition. “We also like Energy because the companies in the sector are well-placed, given softer oil prices,” the report said.

However, according to the report, four factors could dampen interest-- a slower growth recovery, AI enthusiasm elsewhere in Asia, rising geopolitical tensions, and currency swings.