Why HSBC is bullish on Indian equities

India’s equity story is gathering momentum again after falling off the peak it reached a year ago. HSBC in its latest report said it expects the Sensex to reach 94,000 points by the end of 2026, 15% higher than Wednesday's close of 81,715.63.

- Mayur Bhalerao

The 30-stock benchmark index had reached a lifetime high of 85,978.25 points on 27 September 2024.

The brokerage has also upgraded its rating on Indian equities to ‘Overweight’ from ‘Neutral’ in its Asia strategy, alongside Mainland China, Hong Kong and Indonesia.

Mint unpacks HSBC's projections.

What led HSBC to upgrade Indian equities?

For the better part of the past year, India has trailed other emerging markets.

Yet, the macro backdrop is shifting in India’s favour. Inflation has dropped sharply to 1.6%—its lowest in eight years—from above 6% in October last year. That has given the Reserve Bank of India room to cut interest rates, creating a more supportive policy environment.

Also, fiscal measures such as income tax cuts and a revamped GST structure are expected to revive household consumption—one of the pillars of India’s growth. Combined with more realistic earnings expectations, India’s risk-reward profile looks more attractive today than it did a year ago, according to HSBC.