HSBC has downgraded Indian equity stocks to "neutral" from "overweight" on December 9. "The cyclical growth slowdown and elevated valuations have capped the upside in the near term... (and) we see muted market returns in 2025," HSBC said in its note.
The brokerage slashed its 2025-end target for BSE Sensex by nearly 5,000 points from 90,520 to 85,990. This however implies an upside potential of nearly 9% from the opening level of 78,206 as seen on January 9.
Banks, which have the largest weightage in India's listed universe, are struggling as strict policy measures from the central bank have slowed demand for credit, HSBC said.
Notably, Sensex had hit record highs in September 2024, when it had soared to nearly 86,000. However, the 30-stock benchmark index strongly pulled back later, falling to the current levels of around 78,000.
HSBC joins Goldman Sachs and Bernstein who had earlier downgraded Indian equity stocks, citing a slowdown in economic and corporate activity. However, Citi and Morgan Stanley have forecast double-digit returns from Indian stocks, while Motilal Oswal said it sees healthy corporate earnings growth in FY26.
Indian government on January 7 released preliminary estimates of the country’s GDP growth in FY25. It expects India’s growth to dip to 6.4% in the current financial year, the lowest in four years. The estimate was based on a possible decline in manufacturing and investment growth.
(With inputs from Reuters)
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