HSBC downgrades India to 'neutral,' sees 10% upside for Sensex
What's the story
HSBC has downgraded its India outlook from 'overweight' to 'neutral,' with a BSE Sensex target of ₹85,990 for 2025.
The move is mainly prompted by worries over falling corporate profits and elevated market valuations.
Despite India's phenomenal 25% annual growth rate in recent years, HSBC considers this rate unsustainable.
With the Sensex at today's level of 77,650, there is an anticipated upside of nearly 10.7%, based on HSBC's target for the 30-stock index.
Projection revision
HSBC lowers FY25 earnings growth projection for Nifty 50
HSBC has sharply cut its FY25 earnings growth forecast for the Nifty 50 to 5% from an earlier 15%.
The cut signals that profitability challenges are just around the corner for Indian companies.
The firm considers the current valuation metrics at 23 times forward earnings to be high, indicating a potential market overvaluation when combined with reduced earnings growth expectations.
Market influence
HSBC's revised outlook may impact investor decisions
HSBC's revised outlook could lead investors to re-evaluate their positions in the Indian market.
This re-evaluation could affect investment inflows and market performance in the near term.
The firm's updated stance indicates a more cautious approach toward Indian equities, supported by lowered earnings forecasts and valuation concerns.
Market volatility
Indian stock market indices show continued volatility
Recent market activity has highlighted the continued volatility of Indian stock market indices.
Selling pressure from the financial and consumer sectors dragged the markets on Wednesday, even as uncertainty over US Federal Reserve rate cuts kept investors on the edge.
At the time of writing, Sensex was trading at 77,417, down over 200 points. Nifty was down 79 points at 24,447.