Global Research firm HSBC cut the Indian stock market to ‘neutral’ as it foresees muted returns in 2025 amid rising downgrades to alter the high expectations. Domestic slowdown and elevated valuations pose near-term risks, according to HSBC.
The consensus has cut the fiscal 2025 growth estimates for the Nifty 50 from 15% to 5% as earnings remained muted, HSBC said in a report on Nov. 08. “Investors will likely re-evaluate their positions, limiting market returns.”
While the structural growth story remains intact, downgrades matter because India’s earnings multiples are high, the research firm said. “As earnings stall and markets recalibrate their earnings expectations, we see muted market returns in 2025.”
HSBC assigned an 2025-end target of 85,990 for the benchmark Sensex, implying an upside of 10% from the previous close.
India’s benchmark stocks continue to see pressure going into 2025 with a decline of three in the last seven sessions. The NSE Nifty 50 and the BSE Sensex are set to close 2024 with gains of nearly 8.86% and 8.12%, respectively. This makes it nearly 50% below the gains made in the previous year.
Government capex has been weak but when it picks up, it would augur well for manufacturing sectors, HSBC said. Indian equities provide strong defensive qualities against an otherwise uncertain global backdrop, the brokerage noted.
The brokerage said that the domestic market is relatively insulated and could benefit to some extent from any change in trade policy by the incoming US administration. However, “the cyclical growth slowdown and elevated valuations have capped the upside in the near term.”
India is one of the best structural stories in the region, HSBC said. The market benefits from a youthful demographic profile, fast-growing consumer groups, and ongoing investments into both physical and digital infrastructure.
India’s market share in global trade is growing. Currency volatility is at its lowest in years and record forex reserves provide further comfort, it said.
Foreign institutions have been net sellers of $1.3 billion crore worth of Indian equities in January so far, according to data from the National Securities Depository Ltd. In 2024, foreign funds bought stocks worth $124 million, net of primary and secondary market.
. Read more on Markets by NDTV Profit.With muted returns in 2025 on the back of slow earnings and markets recalibrating their earnings expectations, HSBC sees Sensex at 95,990 by the year’s end. Read MoreMarkets, Business, Notifications
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