HSBC Turns Bullish On India; Sees Equities As Hedge Against AI Rally
HSBC Turns Bullish On India; Sees Equities As Hedge Against AI Rally
Indian financial assets are turning attractive across the board, HSBC as quoted by Reuters said on Friday, highlighting value in equities, a favourable setup for the rupee, and an improving case for government bonds.
The global lender has recommended an “overweight" position on Indian equities, saying they now offer better value compared to Chinese stocks, according to Reuters report citing HSBC report.
HSBC said Indian markets present an opportunity for investors seeking diversification away from the searing global rally in artificial intelligence stocks.
“India's equity markets are a good AI hedge," analysts at the firm noted, adding that domestic shares offer stability for investors uncomfortable with the concentrated AI trade dominating U.S. and Asian benchmarks.
The Reserve Bank of India's active defence of the rupee in recent weeks provides an attractive risk-reward balance for holding the currency, HSBC said.
The lender also pointed to strong domestic investor demand and called India's 10-year sovereign bond a tactical buy, targeting a yield drop to 6.25% from 6.51%.
The bullish tone marks a shift from the subdued performance earlier this year, when Indian equities and the rupee lagged amid trade tensions with the United States and limited exposure to AI-led global growth themes.
That underperformance had prompted many global fund managers to pivot toward high-growth, volatile sectors.
However, markets rebounded in October, with the BSE Sensex rising 4.5% for the month. Foreign investors ended a three-month selling streak, buying $1.6 billion worth of local stocks.
HSBC expects the BSE Sensex to reach 94,000 by end-2026, implying a nearly 13% upside from current levels.
It also favours a relative value trade on the rupee, betting it will outperform the Indonesian rupiah.
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“Indian equities and bonds have performed better since September, and we see room for more," HSBC said in its note. “If U.S. tariffs on India's exports are lowered, improving growth expectations, there may be further upside in returns."
The note added: “Foreign investors have heavily gravitated towards AI names in Asia in recent months, partly by cutting exposure to India. We see India as a good AI hedge and a source of diversification."
Source: News18
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