Global investment banking firm HSBC is back to being “overweight” on the Indian stock market, seven months after it had first downgraded it at the height of the Iran war in April.
In its latest note on Monday, November 9, HSBC said the decision to pivot towards Indian equities stems from several structural strengths, that sets the market apart from its regional peers.
HSBC had earlier downgraded India’s markets twice in April, first from “overweight” to “neutral” and then from “neutral” to “underweight” as rising oil prices acted as a major headwind for the markets, leading to a sharp sell-off.
Later in July, HSBC revised its rating on India back to “neutral” and revised its year-end target on the Sensex to 84,000 from 80,500 earlier, citing the fall in energy prices and resilience in consumption, which lowered the earnings risk.
Why Is HSBC Overweight On India Again?
HSBC has upgraded the Indian market back to “overweight” stating that earnings for the quarter have been resilient, and the recent market correction, which took the Nifty 50 to another 52-week low before the recent rebound, made valuations reasonable.
“India offers diversification and low volatility in Asian markets dominated by AI stocks,” HSBC wrote in its note, explaining its upgrade.
While upgrading India, HSBC has downgraded Chinese stocks to “neutral” from their earlier rating of “overweight” citing the lack of potential re-rating catalysts for the market.
Even as it upgrades India, HSBC said that higher oil prices, and El Nino remain the key risks for the stock market, although it may not materially weaken sentiments around the market as a whole.
Where Is HSBC Betting On In India?
Within the Indian stock market, HSBC finds opportunities in banking, industrials, consumer discretionary, insurance stocks and hospital companies.
The Nifty 50 index, over the last seven days, has recovered from lows of 22,500 levels to cross 25,000 by the close of trade last Friday.
HSBC is back to being ‘overweight’ on Indian stock markets after seven months – These are its top picks