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HSBC Global Investment Research announced on Wednesday that Indian equities have become appealing on a regional level, prompting an upgrade of the domestic market to overweight from neutral. The firm noted that US tariffs will have minimal effect on the profits of most publicly traded companies. Despite substantial withdrawals by foreign funds from India over the past year, during which the market significantly underperformed, local investors have shown resilience. HSBC stated that while expectations for earnings growth may dip slightly, valuations are no longer a concern. The government’s policies are starting to positively influence equities, and many foreign funds have light exposure. This year, foreign investors have been net sellers in Asia, typically a negative sign for regional stock markets.
Nevertheless, the market has risen by an average of 20 percent, driven by cash inflow from local retail investors. Following a robust performance in Chinese equities, particularly in Hong Kong, future momentum remains uncertain. While valuations are high, they are not excessive. With retail investors holding $22 trillion in cash, some of which is being gradually allocated to stocks, HSBC anticipates that Chinese equities will continue to rise slowly.