Indian Stock Markets Shine Amid Global Uncertainty
Positive Outlook for Indian Investors
New Delhi, June 11: According to HSBC Global Investment Research, Indian stock markets are emerging as a safe haven for investors amidst global economic uncertainties, thanks to favorable domestic policies.
Investor sentiment has notably improved, positioning Indian markets favorably despite ongoing global trade tensions.
HSBC's proprietary data indicates that both Asia and global emerging market funds are beginning to increase their investments in India, reducing their previous underweight positions. However, global investors remain cautious. The report suggests that a weaker dollar and declining inflation could lead to sustained foreign inflows in the upcoming months.
Support from both the central government and the Reserve Bank of India (RBI) is evident, with government capital expenditure reaching an all-time high in the first quarter of 2025. The RBI has also adopted a more growth-oriented approach than expected, as seen in the recent significant cuts to the benchmark interest rate (50 basis points) and cash reserve ratio (100 basis points). This is expected to positively impact domestic growth.
Domestic investor inflows are providing crucial support to the equity markets, as highlighted in the report.
Surprisingly strong earnings growth was reported in the first quarter, particularly in the industrial, healthcare, and telecom sectors. The consumer discretionary sector saw earnings per share (EPS) increase by 14% due to robust retail and service performance.
Despite this positive performance in Q1, the report cautions that a consistent recovery in earnings growth may still be several quarters away.
Indian equities have experienced a significant rebound in recent weeks, driven by lower domestic bond yields, which have now reached a three-year low. These lower yields are beneficial for local equities.
In this current environment, HSBC recommends focusing on stocks that are expected to deliver strong growth, particularly those with structural or unique advantages. The report maintains a neutral stance on India from an Asian perspective, projecting a Sensex index target of 82,240 by the end of 2025.