HSBC Global Investment Research has upgraded Indian equities to overweight from neutral, citing their growing attractiveness on a regional basis. The firm noted that US tariffs are likely to have minimal impact on the profits of most listed Indian companies.
Despite significant foreign fund outflows over the past 12 months, which coincided with a period of market underperformance, domestic investors have remained resilient, the report said. HSBC observed that while earnings growth expectations may ease slightly, valuations are no longer a concern, as supportive government policies and light foreign fund positioning create a positive environment for equities.
The report highlighted that foreign investors have largely remained net sellers across Asia this year, a trend usually seen as negative for regional stock markets. Yet Indian equities have risen by an average of 20 percent, driven primarily by cash inflows from local retail investors.
HSBC also assessed other regional markets, noting that Chinese equities, after a strong run, may see slower gains despite retail investors gradually reallocating cash to stocks. In Japan, Korea, and Taiwan, AI-related investments remain popular, but crowded trades and elevated valuations pose risks. The weaker Yen has supported Japanese equities, while corporate governance is a long-term positive for Japan and Korea.
Meanwhile, ASEAN markets face challenges, with investor confidence low due to political developments in Thailand and Indonesia. Fiscal prudence in Indonesia remains under scrutiny following a recent cabinet reshuffle.
-IANS