HSBC Global Investment Research forecasts that the benchmark Senex index is likely to reach 96,000 points by the end of next year, driven by reforms initiated by the government. Despite significant withdrawals of foreign capital from India, totaling $15 billion this year, local investors have demonstrated resilience amid a period of market underperformance.
The report indicates that while earnings growth expectations may decline further, valuations are no longer a concern. Additionally, government policies are becoming increasingly beneficial for equity markets, and many foreign funds remain cautiously positioned. “We believe Indian equities are now attractive on a regional basis and are upgrading the market to overweight from neutral. Like in China, most listed companies will not see a significant impact on profits from US tariffs,” the report stated.
India is described as a relatively stable area within the Asian equity landscape. Foreign investors have pulled out substantial funds over the past year, resulting in the Indian market’s underperformance, a trend the report suggests may soon reverse.
Key challenges remain, particularly the slowdown in earnings amidst elevated valuations. Weak consumption and investment trends have prompted the government to concentrate on boosting consumption while the central bank has implemented easing measures. The report highlights that moderate inflation could support domestic demand and improve earnings.
For a sustained improvement in growth, increases in wages and private capital expenditure will be necessary. Furthermore, the report notes concerns regarding the 50 percent US tariff on imports from India. While India faces some of the highest US tariff rates globally, most listed equities are domestically oriented, with less than 4 percent of total sales from BSE-500 companies reliant on US exports. Thus, the direct impact of tariffs on earnings growth is expected to be limited.
“The recovery is likely to be gradual, but the risks are already factored into valuations. Consensus forecasts for 2025 earnings growth have decreased from earlier projections; they now stand at 12 percent, and we anticipate a reduction to 8-9 percent. The current estimates of 15 percent growth for the coming year may appear optimistic and will heavily depend on the effectiveness of the policies designed to stimulate growth,” the report concluded.
Published on September 24, 2025.
