HSBC Global Investment Research has upgraded Indian equities to Overweight from Neutral and downgraded mainland China to Neutral from Overweight, in a significant reallocation in its Asia equity strategy. The change was set out in a report published on Monday, 9 November.
The bank cited a multi-year valuation reset, resilient corporate earnings and strong domestic credit growth as the main reasons for raising its view on India. The move comes as global investors reassess their exposure across Asia, with India drawing fresh attention from several large brokerages at the same time.
Why HSBC raised its India view
Credit growth in India rose 21 percent year on year in October, with corporate lending up around 24 percent and credit to micro, small and medium enterprises climbing 25 percent. HSBC pointed to that domestic credit momentum as a key support for its upgraded view.
The FTSE India index now trades at about 19 times forward price-to-earnings, in line with its long-term average, after a prolonged period of underperformance relative to broader emerging markets. HSBC strategists Herald van der Linde, Prerna Garg and Adam Qi said consensus is forecasting 14 percent earnings growth for India in FY27 and 16 percent in FY28, though they flagged these estimates as slightly optimistic and expected modest cuts in certain sectors.
Only 22 percent of global emerging market funds are currently overweight India, according to the report, which suggests there is room for positioning to shift further if the constructive view spreads.
Other brokerages back India too
The constructive outlook on Indian equities is also reflected in calls by other global brokerages. Citi Research raised its Nifty target to 28,000 from 26,000, implying an upside of around 12 percent, citing a resilient domestic earnings outlook, lower crude oil prices and a more measured pace of artificial intelligence related capital expenditure.
Citi expects earnings to grow at around 15 to 16 percent annually over FY26 to FY28, and it raised its target valuation multiple to 18 times from 17 times, while extending its target horizon to December 2027 from September 2027.
Last week, Jefferies raised India's allocation in its Asia-Pacific ex-Japan relative-return portfolio by two percentage points to 14 percent, maintaining its overweight stance. The brokerage reduced its allocations to South Korea and Taiwan by one percentage point each, retaining underweight positions in both markets, as investors reassess global AI related investment prospects and explore opportunities beyond the technology supply chain.
What HSBC likes, and what it avoids
On sectors, HSBC favours financials, consumer discretionary, industrials, real estate and hospitals. Within industrials, the bank highlighted capital goods, cement, ports and electronic manufacturing services as preferred areas.
It is least positive on information technology, consumer staples, oil and gas, utilities and pharmaceuticals. The sector tilt points to a preference for domestic demand and infrastructure-linked businesses over export-oriented and defensive names.
The combination of the HSBC upgrade and the parallel moves by Citi and Jefferies gives India one of its strongest weeks of brokerage support in recent months, even as valuations have moved back towards their long-term average.
Risks and the China downgrade
Key risks flagged for India include sustained high oil prices, with Brent at USD 99 per barrel at the time of writing, El Nino related agricultural disruption, and building inflation. Consumer price inflation rose to 5.5 percent in September 2026, a 23-month high, and HSBC economists expect the Reserve Bank of India to deliver a further 50 basis-point rate hike in December following a 25 basis-point increase in October.
On China, HSBC acknowledged low valuations and high shareholder yields but said the absence of meaningful re-rating catalysts drove the downgrade. Weak consumer confidence, a stressed property market, soft domestic investment and declining margin financing were cited as headwinds. Passenger car sales dropped 28 percent year on year in August, while retail sales rose just 1 percent.
Within China, the bank retains a preference for banks, consumer stocks with high bond yields, biotech and technology hardware companies exposed to AI infrastructure spending. HSBC said it holds a slight preference for onshore Chinese equities over the offshore market.
