HSBC is still optimistic about India, keeping its “Overweight” position and projecting a 15% increase from current levels in the Sensex year-end objective of 90,520 for 2025.
There are still certain risks and difficulties facing the equity markets, even though growth in India seems to be levelling out at a somewhat slower but still manageable rate.
Despite being strong, India’s economic development appears to be slowing down in comparison to the recent years’ tremendous expansion.
The lofty values at which Indian markets currently trade are supported by earnings, which have increased at an exceptional annualized pace of 25% since 2020.
However, several high-frequency macroeconomic indicators have recently indicated symptoms of deterioration, including vehicle sales, GST collections, and Purchasing Managers’ Index (PMI) statistics.
Since the end of September, this trend has caused almost 60% of listed businesses to lower their earnings estimates.
With small and mid-cap equities predicted to expand at a rate of 30% and large-cap equivalents likely to grow at a rate of only 12%, earnings per share (EPS) growth is becoming more and more lopsided.
The slower growth in this group is problematic because large-cap companies are the primary focus of international investors.
High-profit multiples are a major concern, even if India is one of the markets with the greatest rate of growth in the world. Given the high prices, investors are likely to reevaluate their positions if profit growth continues to halt.
Even if the long-term growth story is still intact, market performance may be impacted by this short-term danger to Indian stocks.
HSBC’s Stock Picks: KIMS and Axis Bank
KIMS (Krishna Institute of Medical Sciences) and Axis Bank are two Indian firms that HSBC has listed in its list of 12 Asia investment ideas for 2025.
India’s capital expenditure upcycle and rising healthcare service demand will be advantageous to KIMS. With a more appealing valuation than its competitors, Axis Bank stands out and presents a compelling investment case in the Indian banking industry.
