In recent days, two prominent global brokerages have downgraded their outlook on India, citing rising oil prices and ongoing supply-side disruptions, which they believe pose near-term challenges for the equity market. Nonetheless, both firms express continued confidence in the country’s long-term growth potential.
JP Morgan has lowered Indian equities from “Overweight” to “Neutral,” highlighting concerns about valuations, earnings risks, and limited engagement with emerging technology sectors. In its latest Asia strategy report, the brokerage stated, “We downgrade Indian equities to Neutral due to elevated valuations relative to EM peers, earnings risks, dilution concerns, and limited exposure to next-gen tech.”
The report emphasized that earnings could be significantly impacted by energy supply disruptions, leading to multiple channels of pressure on corporate profits. JP Morgan has already revised down earnings estimates across various sectors. Additionally, the firm pointed to ongoing equity issuance, noting, “Aggressive promoter stake sales and record capital issuance… cap upside potential,” which could dilute returns for existing shareholders.
In a separate analysis, HSBC downgraded India from “Neutral” to “Underweight,” citing macroeconomic vulnerabilities associated with the country’s reliance on imported energy and inflationary pressures. The bank expressed concern over the sustainability of the ongoing earnings recovery, saying, “Given India’s reliance on imported energy and the potential knock-on effects on inflation and domestic demand, we are concerned about the durability of the ongoing earnings recovery.”
HSBC warned that high oil prices may hinder growth and corporate profitability, indicating that “a renewed rise in inflation could undermine the gradual recovery in demand and contribute to higher non-performing loans… creating downside risks to 2026 earnings.” The firm also noted that while valuations have come off their highs, they may still appear stretched, particularly as earnings forecasts are adjusted downward.
Both JP Morgan and HSBC flagged that the current global context, characterized by geopolitical tensions and high crude oil prices, has tilted the risk-reward dynamics favorably toward other emerging markets. JP Morgan stated, “We see better opportunities elsewhere in EM until valuations de-rate further or earnings visibility improves.” Similarly, HSBC concluded that India “looks less attractive than its North East Asian peers in the current macro environment.”
Despite the near-term caution expressed by both firms, they affirmed that India’s long-term fundamentals remain strong. JP Morgan underlined that “India’s structural growth story remains robust,” underpinned by policy stability and sustained domestic capital inflows. The brokerages acknowledged that while short-term pressures stemming from energy disruptions, inflation, and global uncertainties may affect market performance, India continues to benefit from a resilient domestic economy, ongoing reforms, and a favorable long-term growth outlook.
Published on April 24, 2026.
