By Jaspreet Kalra
MUMBAI (Reuters) -Indian financial assets are looking attractive across the board, HSBC said on Friday, citing equities’ appeal as a hedge against the searing rally in global AI stocks, a favourable risk-profile for holding the rupee and value in government bonds.
Analysts at the firm recommend an “overweight” position on Indian equities, saying that they now offer better value compared to Chinese stocks.
The country’s equity markets are also “a good AI hedge” and provide diversification for investors uncomfortable with the AI rally, the firm said in a note.
The Reserve Bank of India’s defense of the rupee over recent weeks provides good risk-reward for holding the currency, while improving domestic investor demand offers a tactical buying opportunity for the country’s 10-year government bond, the note said.
WHY IT MATTERS
The positive outlook contrasts with the underperformance of Indian equities and the rupee this year amid trade friction with the U.S.
Indian equities’ weakness was exacerbated earlier in the year by limited exposure to artificial intelligence, prompting fund managers to adopt volatile high-growth strategies.
Indian equities bounced back in October though, with the BSE Sensex ending 4.5% higher for the month, while foreign investors snapped a three-month selling streak to pick up $1.6 billion worth of local stocks.
BY THE NUMBERS
HSBC has an end-2026 target for the BSE Sensex at 94,000, a near-13% rise from current market levels.
It also recommends buying the country’s 10-year sovereign bond with a target of the yield declining to 6.25%, down from around 6.51% currently.
For the rupee, meanwhile, the firm its backing a relative value trade that wagers on the Indian currency outperforming its Indonesian peer.
GRAPHIC:
KEY QUOTES:
Indian “equities and bonds have performed better since September, and we see room for more … If US tariffs on India’s exports are lowered, thereby improving growth expectations, then there may be more room for a rise in returns.”
“Foreign investors have heavily gravitated towards AI names in Asia in recent months, and some of that was funded by cutting their exposure to India. We see India as a good AI hedge and provides diversification for those who feel uncomfortable with the AI rally.”
(Reporting by Jaspreet Kalra; Editing by Saumyadeb Chakrabarty)
